by David Young, President
On September 18, 2024, the Federal Reserve cut the federal funds rate by 50 basis points — its first reduction since the pandemic. This pivot marked a shift from one of the most aggressive tightening cycles in decades.
Fast forward to September 17, 2025: the Fed trimmed the rate by another 25 basis points, bringing the pace of easing to modest levels.
Some investors viewed the cuts as a warning of underlying weakness. Yet much of the data tells a more nuanced story: the economy is still growing, though less sharply; hiring has slowed; unemployment has nudged upward; and inflation, while easing, remains somewhat sticky above target.
As Fed Chair Jerome Powell put it, “The time to support the labor market is when it’s strong, not after layoffs begin.”
The Fed’s projections now point toward two more quarter-point cuts in 2025, and markets are pricing in an additional 0.50–1.00% of easing in 2026.
It’s a delicate balancing act: cut too fast, and inflation may reaccelerate; wait too long, and recession risks increase. For now, Powell’s soft-landing scenario still seems plausible — and markets have welcomed the move with optimism.