Fed cuts rates for first time this year amid Trump pressure
Rate move sparks questions about central-bank independence as White House pushes for more aggressive easing
The Federal Reserve cut its benchmark rate by 0.25 percentage point to a range of 4.00% to 4.25%, the first rate cut since December, in a move that unfolded amid sustained pressure from President Donald Trump for cheaper borrowing costs. Fed Chair Jerome Powell said inflation remains somewhat elevated at 2.9% but framed the decision as warranted by softer hiring momentum and a moderation in overall economic activity. "Job gains have slowed and downside risks to employment have risen. Recent indicators suggest that growth of economic activity has moderated," Powell said, signaling that the cut was intended to support the labor market without reigniting inflation.
The decision was not unanimous on the details or the trajectory ahead. Stephen Miran, whom Trump installed this week as the White House’s top economic adviser and who joined the Fed on leave from his former post, voted for a larger, 0.50 percentage point cut. Officials indicated that there would be two more rate cuts this year, with further moves contemplated in 2026 and 2027, but there were deep divisions in the outlook. Some officials saw the path lower, while others urged patience amid economic and inflation uncertainties. Powell underscored a commitment to independence, saying the Fed would remain data-driven and resist political pressure.
Neil Wilson, a market strategist at Saxo Markets in London, called the move a political cut, noting that Miran’s vote for a bigger cut highlighted the internecine tensions over Fed independence and policy direction. Trump has publicly attacked the Fed for acting too slowly and has floated personnel moves aimed at reshaping policy. The President has threatened to fire Powell before the end of his term and has sought to replace other governors, including Lisa Cook, as part of a broader push to tilt policy toward faster easing.
The newly announced stance comes as markets weigh the balance between inflation risks and growth signals. Some Fed officials projected additional cuts this year, while others warned that a overly aggressive pace could rekindle price pressures. The central bank’s median outlook had suggested rate levels in the 3.5% to 4.25% range by year-end, but with substantial splits on the pace and timing of future moves.
The backdrop to the Fed decision includes mixed U.S. data: inflation has ticked higher but remains below the 3.8% rate seen in the United Kingdom, and the latest jobs data showed 22,000 jobs added last month, contributing to concerns about the strength of the world’s largest economy. Traders and analysts said the Fed’s decision signal may be interpreted as a measured attempt to support activity without derailing inflation control.
In Washington and beyond, the political dynamic surrounding the Fed’s independence drew renewed attention. Powell stressed the central bank’s mandate to act based on economic data rather than political expediency. While some market participants framed the cut as necessary accommodation, others warned that continued political pressure could undermine the credibility of monetary policy.
In London, sentiment around the Bank of England’s policy path reflected a different balance. The BoE was widely expected to hold rates at 4% amid stubborn inflation near 3.8% in August, with analysts forecasting little room for rapid easing this year. Suren Thiru of the ICAEW said the inflation figures likely closed the door on near-term rate cuts in the U.K., underscoring how global central banks are navigating divergent inflation dynamics. Laith Khalaf of AJ Bell noted that the U.K. inflation problem kept the BoE cautious about easing, even as markets speculated about a synchronized global easing cycle.
As the Fed’s policy course unfolds, observers will be watching for how political considerations may influence future communications and the pacing of any additional easing. Powell reiterated the Fed’s pledge to maintain its independence, while critics argued that political pressures could narrow the window for a data-driven approach. The coming months are expected to bring further debate on whether the central bank can stay on course amid evolving signals from the labor market, consumer prices, and financial conditions.
