Federal Reserve Rate Cut Sets the Target Range at 4% to 4.25%

The Committee said growth in economic activity moderated in the first half of the year. It noted that job gains have slowed and the unemployment rate has edged up but remains low, while inflation has moved up and remains somewhat elevated. It judged that downside risks to employment have risen.

How the Committee voted

Eleven members voted for the decision. One member, Stephen I. Miran, dissented, preferring a cut of half a percentage point. The Committee said it will continue reducing its holdings of Treasury securities, agency debt and agency mortgage-backed securities, and it restated its goals of maximum employment and inflation at 2% over the longer run. The Fed also published an implementation note setting out the technical adjustments to its policy rates that support the new range.

What it means for borrowers and markets

The Federal Reserve rate cut feeds through to US dollar borrowing costs, including floating-rate loans priced off benchmark rates, and affects the pricing of debt financings, leveraged loans and deposit products. Banks, private credit funds and corporate treasurers with dollar exposure will review hedging and refinancing plans in light of the lower range.

What happens next

In considering any further adjustments, the Committee said it will assess incoming data, the evolving outlook and the balance of risks. Its next scheduled meeting is on 28 and 29 October 2025. Borrowers negotiating new facilities, and lenders setting interest rate floors, will be watching whether the Committee continues to ease policy over the remainder of the year. Non-US lenders and borrowers with dollar funding needs, including in Europe and Asia, will also feel the effect through cross-currency pricing.

Sources

• Federal Reserve: Federal Reserve issues FOMC statement, 17 September 2025
• Federal Reserve: Implementation Note issued 17 September 2025