Fed Cuts Rates as Job Market Stumbles

For the first time in 2025, the Federal Reserve has cut interest rates shedding 25 basis points and bringing the federal funds rate to a new range of 4% to 4.25%. This decision, announced Wednesday, came amid unmistakable signs that the U.S. labor market is cooling and growing political pressure from Washington, D.C.

Fed Chair Jerome Powell said the committee remains committed to both sides of its so-called “dual mandate” controlling inflation while maximizing employment. But in reality, the rate cut signals a clear shift in focus: keeping the job market from deteriorating further as inflation remains stubbornly above the Fed’s 2% target.

It’s the first cut since December 2024 and follows five straight meetings in which the Fed held interest rates steady.

Here’s what triggered the reversal:

• The U.S. economy added 911,000 fewer jobs than previously reported from April 2024 to March 2025, according to a revision from the Bureau of Labor Statistics.

• Unemployment is rising, and hiring has slowed as businesses react to tightening trade and immigration policies.

• Tariffs are quietly fueling inflation, with Powell admitting they’re contributing about 0.3 to 0.4 percentage points to core inflation, which sits at 2.9%.

Despite the inflation spike, Powell justified the cut by emphasizing a softening labor market. “Downside risks to employment have risen,” he said, noting that “inflation remains somewhat elevated,” but hinting the price hikes could be transitory and tariff-induced.

That’s a dangerous assumption. Inflation might no longer be at 9%, but it’s no longer “transitory” either and Americans are still paying more for housing, groceries, energy, and basic goods. This new rate cut threatens to reignite price pressures just as consumers were beginning to catch their breath.

The bigger issue? The Fed is clearly not acting in a political vacuum. While Powell insists the central bank is independent, the optics say otherwise. President Donald Trump has repeatedly called for rate cuts to boost growth and relieve consumers and with a presidential election looming, it’s hard to ignore the timing.

Even more telling, Powell faced questions about Trump’s ongoing effort to remove Fed Governor Lisa Cook over allegations of mortgage fraud. Although no charges have been filed, the White House is reportedly scrambling to shield her from removal, even as a federal court ruled in favor of temporarily blocking Trump’s firing attempt. Cook voted in favor of the rate cut this week.

It’s not just about rates. It’s about trust.

After years of massive COVID-era printing, misjudged inflation forecasts, and politically tinged decisions, the Federal Reserve is facing a confidence crisis. Markets used to see the Fed as a steady hand. Now, they see it as a political weathervane, flinching at every uptick in jobless claims or every tweet from a politician.

Meanwhile, the people who pay the price middle-class Americans are stuck in an economy where wages lag behind inflation, mortgages are unaffordable, and job security is slipping.

This cut may buy the Fed more time, but it won’t fix the damage that’s already been done under Biden’s broken economy. We don’t need more monetary tricks we need real, pro-growth, pro-worker leadership in the White House again.

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