The U.S. Federal Reserve issued its first benchmark interest rate cut following its latest Federal Open Markets Committee (FOMC) meeting on Sept. 17 — with a quarter-point cut that was expected, though industry groups were hoping for something larger.

It moves the central bank’s interest rate at 4.0%-4.25%, changing for the first time since December 2024 after the Fed maintained the rate for five straight FOMC meetings.

It also puts the rate at its lowest level in almost three years.

One governor — who joined the board earlier in the week after being appointed by President Trump — dissented in favor of a half-point rate cut.

Distributors and manufacturers may have been hoping for a half-point cut, but economists’ consensus expectations was for a quarter-point.

“Recent indicators suggest that growth of economic activity moderated in the first half of the year. Job gains have slowed, and the unemployment rate has edged up but remains low. Inflation has moved up and remains somewhat elevated,” the Fed’s FOMC statement said. 

U.S. Federal Interest Rate

source: tradingeconomics.com 

The Fed’s “Dot Plot” — which tracks individual Fed governors’ views on interest rates — indicated that the majority of them project two more rate cuts by the end of 2025. 

New projections from the Fed indicated the board sees median inflation ending 2025 at 3%, which would be well above the Fed’s 2% target. Meanwhile, its projection for unemployment remained unchanged at 4.5% and the forecast for economic growth edged up to 1.6% from 1.4% previously.

The Fed’s final two FOMC meetings this year are Oct. 28-29 and Dec. 9-10.

North of the border, Canada likewise cut its benchmark interest rate by a quarter point to 2.5%.