Federal Reserve September FOMC Minutes: First Rate Cut, Rising Labor Market Risks

By ariachiang

2025-09-18

At the Federal Reserve's September 2025 FOMC meeting, the committee decided to cut the federal funds rate by 25 basis points to a new target range of 4.00% to 4.25%, marking the first rate reduction since December of the previous year. Economic activity growth has moderated recently, job gains have slowed, and the unemployment rate has edged up but remains low. Inflation has risen slightly, remaining somewhat elevated. The Fed’s updated economic projections show a modest upward revision in real GDP growth, with inflation and unemployment forecasts steady but downside risks to employment have increased.

Detailed Data Performance:

  • The federal funds rate target range was lowered from 4.25%-4.50% to 4.00%-4.25%, with market expectations for two more rate cuts by year-end, bringing the range down to 3.50%-3.75%.
  • Labor market growth has slowed, with the Fed expressing concern about increased downside risks to employment, reflected in their statement and the updated dot plot indicating greater likelihood of cuts.
  • Core CPI inflation remains steady at around 0.3% month-over-month, with an annual rate near 3.1%, largely driven by food and new vehicle price increases.
  • The third-quarter GDP growth is projected at approximately a 3.3% annual rate, slightly revised downward from last month, indicating slowing economic growth.

The September 2025 FOMC minutes reveal concerns over a weakening labor market, prompting the first rate cut since late last year to support employment and economic activity. In the short term (1-2 months), markets expect the Fed will closely monitor the October jobs report to guide the pace of further rate cuts, which could improve market sentiment. In the medium term (within six months), with gradual rate reductions and inflation claims easing, economic growth is expected to maintain moderate expansion, though global uncertainties pose risks to exports and capital spending. Investors should closely watch labor market and inflation data as key signals for future Fed policy direction.

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