Fed Cuts Rate for First Time in 2025

The Federal Reserve Open Market Committee (FOMC) approved the first rate cut in nine months in a widely anticipated decision given recent concerns over the labor market and inflation. 

As a result of the decision, the target range for the federal funds rate has been lowered by 25 basis points to a range of 4% to 4.25%. The 25-basis cut was a near unanimous decision, with recently appointed board member Stephan Miran voting against the quarter point cut in favor of a half point cut.

In its statement announcing the decision , the FOMC said growth of economic activity “moderated” in the first half of the year amid slowing job growth, rising unemployment, and elevated inflation levels. The Committee noted downside risks to employment have risen amid a more uncertain economic outlook. 

Data from the U.S. Bureau of Labor Statistics (BLS) indicated the Consumer Price Index (CPI) increased 0.4% in August and 2.9% over the last 12 months. At the same time, just 22,000 jobs were added to the economy in August with the unemployment rate ticking up to 4.3%. The combination of these data and recent trends contributed to many forecasting a rate cut at the September FOMC meeting. 

“In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks,” the FOMC said in its statement. 

For the housing sector, 2025 has been a slow year characterized by muted demand and affordability concerns. Builder confidence has dipped in recent months as many hesitant buyers remain on the sidelines. However, the most recent Housing Market Index (HMI) from NAHB and Wells Fargo indicated more builders were optimistic that a favorable interest rate climate could bring these buyers off the sidelines in the final quarter of 2025.