Fed Starts Its Policy Easing with 25bps Cut, What Now?

The first cut was expected, the next moves matter more.

After keeping interest rates on hold for the past 9 months, the US Federal Reserve finally decided to reduce the federal funds rate (FFR) by 25bps to a 4–4.25% range this week.

This decision was largely anticipated by market participants as the US central bank has been signaling its intent to resume easing since the Jackson Hole conference last month.

Additionally, the Fed’s latest “dot-plot” projects two more 25bps rate cuts in 2025, and one 25bps cut each in 2026 and 2027, bringing the FFR to 3–3.25%.

The initial market reactions were mostly muted, with US equities, gold, and bond prices closing lower after the announcement, as investors do not expect the Fed to embark on an aggressive easing cycle.

However, given the significant downward revisions in US payroll data this year, the Fed’s latest move could be perceived as “too late” by investors and even by some within the government.

Particularly, US President Donald Trump and Treasury Secretary Scott Bessent have repeatedly voiced concerns that the Fed is not moving quickly enough to loosen policy amid a deteriorating labor market.

Thus, it appears that the future of the US central bank is increasingly “political” and “dependent” on central government pressure, especially as President Trump is very likely to appoint a new Fed Chair in 2026.

Nevertheless, the Fed is the last among major central banks (excluding BoJ) to restart monetary policy easing.