09/19/2025
Fed cuts rates by a quarter-point, though Miran dissents
Newly minted Fed Governor Stephen Miran voted for a 0.5% rate cut
Economy, Interest Rates, Monetary Policy
The wait is over.
After holding interest rates steady for five straight meetings, the Federal Reserve’s monetary policy committee voted Wednesday to cut its benchmark rate by a quarter-point. That means the overnight lending rate for banks will now be set at a target range of 4% to 4.25%.
Stephen Miran cast the lone dissenting vote, preferring a larger 0.5% rate cut. Miran, a nominee of President Donald Trump, was confirmed by the Senate on Monday to fill a temporary slot on the Fed’s Board of Governors in a highly partisan 48-47 vote.
“Recent indicators suggest that growth of economic activity moderated in the first half of the year,” the Fed wrote in a statement announcing the decision. “Job gains have slowed, and the unemployment rate has edged up but remains low. Inflation has moved up and remains somewhat elevated.”
The statement continued: “The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment have risen.”
According to the Summary of Economic Projections released concurrently with the September rate decision, a majority of meeting participants project two additional rate cuts as a possibility in 2025, but just one cut in 2026.
Today’s Fed rate decision was widely expected. Heading into the second day of the Federal Open Market Committee’s two-day summit, futures traders were pricing in a 96% chance of a quarter-point cut, according to CME FedWatch.
Following the last three FOMC meetings, Fed Chair Jerome Powell had urged patience on rate cuts, saying the central bank needed to take a wait-and-see approach on the potential inflationary impacts of the Trump administration’s tariff policies.
But a summertime slowdown in the labor market forced the Fed’s hand, leading to the 0.25% reduction to the federal funds rate, which broadly impacts borrowing costs across the U.S. economy. It’s the first time the Fed has eased rates since last fall, when three successive cuts lowered the benchmark rate by a full percentage point.
Lisa Cook, who recently received a favorable ruling from a federal appeals court allowing her to attend the meeting, was among the 11 FOMC members voting for a 0.25% rate cut. Trump moved to fire Cook on Aug. 25 for alleged mortgage fraud. She denied the claims, and the case will likely be decided by the Supreme Court.
Mike Fratantoni, chief economist of the Mortgage Bankers Association, said in a commentary released shortly after the rate decision that “the strong vote for the 25-basis-point cut suggests that members, while acknowledging that downside risks to the job market have increased, are not panicking about the state of the economy.”
He noted that mortgage rates moved lower last week in anticipation of the rate cut, “spurring a strong jump in refinance activity.”
“If mortgage rates hold at these levels, origination activity will be boosted, both for homeowners who purchased in the last three years and can realize considerable savings at these rates, and for potential homebuyers, who now have one more reason to look for a home, in addition to increasing housing supply in many markets,” Fratantoni stated.
Fed dot plot projections
Besides the rate announcement, a highly anticipated component of the September FOMC meeting was the release of the central bank’s quarterly “dot plot” that anonymously tracks participants’ assessments of the appropriate path of monetary policy. Besides the 12 voting members of the FOMC, seven additional Fed members participated in that forward-looking survey.
The range of responses suggest the FOMC’s two remaining policy meetings this year could be contentious.
In what’s known as a “soft dissent,” one policymaker indicated support in the dot plot for holding rates steady in 2025.
On the opposite end of the spectrum, one projection — presumably Miran’s — assessed that the fed funds rate should be set in the range of 2.75% to 3% by year-end.
Six of the 19 participants are currently in favor of just one rate cut this year. Two indicated support for one additional cut, which would put the benchmark rate in a range of 3.75% to 4%. Nine dots on the plot show support for two more quarter-point cuts in 2025.
Author
Luke Baynes
