The Federal Reserve cut interest rates by a quarter percentage point Wednesday, its first reduction of 2025, and projected two more cuts for the rest of this year.
The central bank voted in a split decision to cut its benchmark interest rate to a range of 4.00% to 4.25%. The 25-basis point cut marked the first time the Fed has eased rates since last December.
Newly confirmed Fed governor Stephen Miran disagreed with the decision and preferred to cut rates by a half a percentage point.
The median estimate from all Fed officials is that there will be two more rate cuts this year, up from a prior estimate released in June, as the labor market softens.
"Job gains have slowed," Fed officials said in their statement released Wednesday, "and the unemployment rate has edged up" but remains "low."
The predictions about what monetary policy could look like for the rest of 2025 came in the form of the Fed's "dot plot," a chart updated quarterly that shows each official's prediction about the direction of the central bank's benchmark interest rate.
The last dot plot, released in June, revealed a divide among Fed officials about the path forward amid uncertainties about how the Trump administration's policies on tariffs, immigration, and taxes would impact the economy. At that time 7 officials saw no rate cuts this year while eight saw 2 cuts.
That division was still evident in the latest dot plot. Nine officials now see 3 cuts, while 6 officials see one cut. One saw no cuts and one saw six cuts. For next year, the median is for one more rate cut.
Fed policymakers also used that dot plot to provide an update on their predictions for the direction of the economy.
Inflation is now seen rising 3.1%, the same as the previous estimate, while GDP was upgraded to 1.6% versus a 1.4% prediction made in June. The unemployment rate is seen ticking up to 4.5% compared with the same estimate in June. The unemployment rate currently stands at 4.3%.
The labor market was already starting to slow in the lead up to this week's Fed meeting, which contributed to the support for a cut Wednesday. The economy added just 22,000 jobs in August, with the unemployment rate rising to 4.3% from 4.2%.
Job growth for June was also recently revised into negative territory to -13,000 jobs, while July showed below-trend growth compared with the past year. All of that amounted to three months of slowing job growth.