The Federal Reserve cut the federal-funds rate by 0.25 percentage points to a new range of 4.00%-4.25% due to increased downside risks to employment. Market expected a half-point cut but only a quarter-point was approved, with Stephen Miran as the lone voter for a bigger cut. Miran advocates for looser monetary policy.

Miran’s projection for the federal-funds rate at the end of 2025 is 2.75%-3.00%, aligning with President Trump’s desires for rate reductions. However, Miran’s projections are not as low as Trump’s goal of 1.25%-1.50%. The lowest projection in the dot plot is 2.25%-2.50% at the end of 2027.

Fed Chair Powell emphasized the Fed’s culture of independence. FOMC projects the rate to be 3.50%-3.75% by the end of 2025 and further drop to 3.25%-3.50% by the end of 2026. Core inflation is expected to be 2.6% by the end of 2026, while unemployment is projected at 4.4% in the fourth quarter of 2026.

Expectations are for a one-off shock from tariffs to inflation, necessitating looser monetary policy. Powell highlighted a precarious balance in the labor market, with risks of layoffs and reduced spending if demand continues to contract. Market conditions and economic activity are expected to weaken.

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1. Morningstar reports that the US economy added 943,000 jobs in July, exceeding expectations and lowering the unemployment rate to 5.4%.

2. According to Morningstar, Apple’s third-quarter revenue reached $81.4 billion, a 36% increase from the same period last year, driven by strong iPhone and Mac sales.

3. Morningstar reveals that Tesla’s second-quarter revenue surged to $11.96 billion, up 98% year-over-year, with a net income of $1.14 billion.: US Fed Cuts Rates and Signals More to Come in 2025