US Fed Cuts Interest Rate by 0.25% After 9 Months... Signals Two More Cuts This Year

Benchmark Rate Lowered to 4.0-4.25% Annually
Policy Statement Adds Phrase: "Job Gains Have Slowed"
"Trump Economic Advisor" Myron Calls for "Big Cut"
Outlook for Two More Rate Cuts This Year... One More Than Previously Projected
Growth

The United States Federal Reserve (Fed) has resumed cutting its benchmark interest rate after nine months, lowering the rate by 0.25 percentage points. The Fed also signaled the possibility of two additional rate cuts within the year, increasing its projection for rate reductions by one compared to previous forecasts.

On September 18 (local time), following the Federal Open Market Committee (FOMC) regular meeting, the Fed announced in its policy statement that it had decided to lower the federal funds rate by 0.25 percentage points to a range of 4.0% to 4.25% per year. This marks the first rate cut in nine months after maintaining a freeze since the last reduction in December of the previous year. As a result, the gap between the benchmark interest rates of South Korea and the United States has narrowed to 1.75 percentage points at the upper bound.

Of the 12 voting FOMC members, 11 supported the decision. Only board member Stephen Myron, known as "Trump's economic adviser" and attending his first meeting, voted against, advocating for a "big cut" of 0.5 percentage points. With President Donald Trump recently emphasizing the need for a big cut, markets had expected Myron-who also serves as the White House National Economic Council Director-to push for this position. In contrast, Vice Chair Michelle Bowman and board member Christopher Waller, who had opposed the rate freeze at the July meeting by supporting a 0.25 percentage point cut, agreed with the majority opinion this time.

In its policy statement, the Fed described economic activity as having moderated and newly added the phrase "job gains have slowed," citing the recent slowdown in employment as a basis for the rate cut. However, it pointed out that inflation "has increased and remains somewhat elevated." The statement continued, "Uncertainty about the economic outlook remains high," and added, "The Committee is attentive to both sides of its dual mandate (price stability and maximum employment) and judges that downside risks to employment have increased."

Regarding the interest rate outlook, the Fed indicated the possibility of two more cuts this year-one at the remaining October meeting and another at the December meeting, each by 0.25 percentage points. This is one more cut than the two projected in the June dot plot for this year.

However, there was significant divergence among committee members. Of all 19 FOMC members, 7 believed no further cuts were needed this year, 2 supported one additional cut (0.25 percentage points), and 9 supported two more cuts (0.5 percentage points). One member argued for a total additional cut of 1.25 percentage points within the year, presumed to be Myron. With such divided opinions, intense debate is expected over the future path of interest rates.

According to the dot plot, a single 0.25 percentage point cut is also expected in both 2026 and 2027.

In the Summary of Economic Projections (SEP) released alongside this decision, the Fed raised its forecast for this year's gross domestic product (GDP) growth from 1.4% to 1.6%. The unemployment rate is projected to be 4.5% at year-end, while the core personal consumption expenditures (PCE) price index, which the Fed prioritizes as a measure of inflation, is expected to remain at 3.1%, unchanged from previous forecasts.