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The Federal Reserve lowered its interest rate by a quarter-point on Wednesday, shifting its focus from inflation and signaling two more cuts this year.
The move reduced the Fed’s short-term rate to about 4.1 percent from 4.3 percent in the first cut since December. Chair Jerome Powell and other policymakers had kept rates steady for months as they assessed the effects of tariffs, stricter immigration enforcement, and other Trump administration policies on the economy.
Lower borrowing costs could help boost mortgages, auto loans and business investment, supporting growth and hiring. Fed officials projected two more cuts this year and one in 2026.
Inflation remains above the Fed’s 2 percent target, rising 2.9 percent in August from a year earlier, up from 2.7 percent in July. Tariffs have pushed up the price of goods like food, furniture, and appliances, complicating the Fed’s decision-making.
“We’re a hundred basis points, at least, over where we should be,” Trump senior counselor for trade and manufacturing Peter Navarro said on “Mornings with Maria” on Wednesday. “That’s disequilibrium. It hurts our trade balance. It hurts everybody who’s trying to get a mortgage. It’s frozen up the housing market.”
“It should be 50 [basis points cut] today, and it should be another 50 at the next meeting. That’s where it should be,” he continued.
The move also comes after President Trump removed Federal Reserve Governor Lisa Cook from the central bank’s board, escalating a dispute over allegations that she falsified documents to obtain favorable mortgage terms.
The decision followed Trump’s public call last week for Cook to resign, a request she declined. In a letter posted on Truth Social, Trump said the move was necessary to preserve confidence in the Fed.
“The Federal Reserve has tremendous responsibility for setting interest rates and regulating reserve and member banks,” the president wrote.
“The American people must be able to have full confidence in the honesty of the members entrusted with setting policy and overseeing the Federal Reserve. In light of your deceitful and potentially criminal conduct in a financial matter, they cannot and I do not have such confidence in your integrity. I have determined that there is sufficient cause to remove you from your position,” he added.
Cook’s firing remains in a legal battle following the decision.
