CONTACT   CLIENT PORTAL

FDP Wealth Management

Sep 22, 2025

The Fed Delivers a Long-Awaited Rate Cut

To virtually no one’s surprise, the Federal Reserve slashed the target on its key interest rate—the fed funds rate—at the conclusion of its meeting on Wednesday. The only question regarding the decision was whether the Fed would cut by a quarter point (25 basis points [bp]; 1 bp = 0.01%) or 50 bp. They opted for 25 bp and a new range of 4.00-4.25%.
It is the first rate cut since last December. The vote was nearly unanimous at 11–1, with the dissenter favoring a 50 bp reduction.

At the press conference that followed the meeting, Chair Powell said there “wasn’t widespread support at all for a 50 bp cut.” He described the move as “risk management,” suggesting that while economic concerns shouldn’t be dismissed, they are not too worrisome right now.

What prompted last week’s move? “Labor demand has softened,” Powell said, and the unemployment rate has inched higher.

Yet, he said that tariffs are having some impact on inflation (they are), and that could continue for the rest of the year. However, he added that the pass-through to consumers of tariffs has been “slower and smaller” than expected.

But by moving now, the Fed hopes that lower interest rates will encourage more spending, which supports economic activity.

Yet, inflation is no longer trending toward the 2% target. Nonetheless, the Fed proceeded with a 25 bp rate cut last week and signaled the possibility of further easing this year.

Part of this stance reflects the Fed’s belief that the inflationary impact of tariffs is temporary. Still, if job growth was stronger and the unemployment rate was lower, it seems unlikely the Fed would have reduced rates last week.

Every cycle has its own nuances, but economic growth accompanied by a modest easing by the Fed has historically lent support for stocks.

BACK TO PROSPERITY PARTNERS BLOG

Reproduction Prohibited without Express Permission. Copyright FDP Wealth Management. All rights reserved. Advisory Services offered through FDP Wealth Management, LLC, a state Registered Investment Adviser and Valmark Advisers, Inc. a SEC Registered Investment Advisor. Securities offered through ValMark Securities, Inc., Member FINRA/SIPC. 130 Springside Drive, Suite 300, Akron, OH 44333-2431 800.765.5201 Prosperity Partners and FDP Wealth Management, LLC are separate entities from ValMark Securities, Inc. and Valmark Advisers, Inc. Prosperity Partners, FDP Wealth Management, LLC, ValMark Securities, Inc., Valmark Advisers Inc., and their representatives do not offer tax advice. You should consult your tax professional regarding your individual circumstances. Indices are unmanaged and cannot be invested directly in. Past performance is not a guarantee of future results.

Indices are unmanaged and do not incur fees, one cannot directly invest in an index. You should consult your tax professional regarding your individual circumstances. This information is provided by Financial Jumble, LLC. Financial Jumble, LLC is a separate entity from ValMark Securities, Inc. and ValMark Advisers, Inc.
BACK TO BLOG

RELATED POSTS

A Three-Year Anniversary

On October 12, 2022, the S&P 500 Index hit a cyclical low. In hindsight, that marked the end of the 2022 bear market. Fast forward three years, and the current bull market has now been running for three years.

READ MORE

Government Shutdowns: Why Investors Rarely Care

Historically, US government shutdowns have had minimal impact on the stock market. Let’s review the graphic below. Since 1976, government shutdowns of varying lengths have had little effect on stocks, as measured by the S&P 500 Index.

READ MORE

Reductions in Interest Rates and Market Response – Historical Review

A couple of weeks ago, the Federal Reserve cut its key rate, the fed funds rate, by a quarter-percentage point to 4.00-4.25%. It’s the first rate cut since last December. So, is this one and done, or will there be a series of rate reductions? A speech delivered last week by Fed Chief Powell wasn’t overly dovish, but the Fed meets two more times this year, and Powell left the door open to at least one more rate cut in 2025.

READ MORE

Last CPI Tees Up Fed Rate Cut

The only thing that might have been standing in the way between the Federal Reserve and a rate cut this week was last Thursday’s release of the Consumer Price Index (CPI). While the inflation figures weren’t particularly soft, August’s data didn’t reflect a sharp rise in prices either, all but guaranteeing that the Fed will move at Wednesday’s meeting.

READ MORE

No Hire, No Fire Economy

For starters, the title is a simplified five-word summary of the labor market. Recall that last week, we explored the low level of layoffs. This week, we shift the focus to hiring trends. But first, let’s take a closer look at the numbers from the latest jobs report.

READ MORE