Its the first interest rate cut in about a year

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Fed lowers rates by 0.25%: The Federal Reserve cut the federal funds rate to a target range of 4%4.25%, marking its first reduction in 2025 after nearly a year without changes, in response to slowing economic growth and a weaker job market.
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Goal: support jobs and control inflation: Policymakers aim to balance risks to employment and inflation, emphasizing their commitment to maximum employment and bringing inflation back to 2% over the long run.
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Impact on consumers: The cut is expected to ripple through borrowing costscredit cards, mortgages, auto loans, and personal loans could see lower rates, offering households and businesses modest financial relief.
As anticipated, the Federal Reserves Open Market Committee has voted to lower the interest rate on the federal funds rate by 25 basis points. The rate will float between 4% and 4.25%.
It is the first cut in 2025 and follows economic data reports showing the economy and job market are weakening. The policymakers are hoping the cut in interest will boost the economy without increasing inflation.
Recent indicators suggest that growth of economic activity moderated in the first half of the year, the Fed committee said in a statement. Job gains have slowed, and the unemployment rate has edged up but remains low. Inflation has moved up and remains somewhat elevated.
The Committee said it is trying to achieve maximum employment and inflation at the rate of 2% over the longer run. It added that uncertainty about the economic outlook remains elevated. The Committee said is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment have risen.
In support of its goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 4 to 41/4 percent, the statement read. In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.
The policymakers said they will continue reducing their holdings of Treasury securities and agency debt and agency mortgagebacked securities. The Committee said it is strongly committed to supporting maximum employment and returning inflation to its 2% objective.
What it means for consumers
When the Fed cuts the federal funds interest rate, the rate banks charge each other for overnight loans, it sets off a chain reaction across the U.S. financial system. While consumers dont borrow at this specific rate, the decision influences nearly every type of borrowing cost, from mortgages and auto loans to credit cards and student loans.
Credit card rates, which are tied closely to banks prime lending rates, often fall soon after a Fed rate cut. This can provide modest relief for households carrying balances.
Mortgage rates, especially those for adjustable-rate loans, tend to follow suit, though fixed-rate mortgages are influenced by broader bond market trends as well.
Auto loans, personal loans, and home equity lines of credit also generally become cheaper when the Fed eases borrowing costs, potentially making large purchases or refinancing more attractive.
Posted: 2025-09-17 18:17:31