The Federal Reserve has reduced its target range for the federal funds rate by 25 basis points, now setting it between 4 percent and 4.25 percent. This move, anticipated by many observers, comes as the Federal Open Market Committee (FOMC) continues to weigh its dual mandate of promoting price stability and maximum employment.
Recent data revisions indicating a significant drop in payroll job figures for the year ending in March played a role in the decision to cut rates. While inflation remains above desired levels, concerns about risks to employment have increased.
According to the FOMC statement, “The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment have risen.”
The committee's vote was 11-to-1 in favor of the reduction. The only dissent came from newly appointed Fed governor Stephen Miran, who advocated for a larger cut of 50 basis points. While such a larger reduction did not occur at this meeting, additional rate cuts may be forthcoming before year-end as the Fed appears likely to continue an easing approach similar to late last year.
Longer-term interest rates, influenced more by market conditions than direct Fed policy decisions, have also declined during 2025. The yield on the 10-year U.S. Treasury note is now just above 4.1 percent—down from earlier levels this year—and mortgage rates are at their lowest point in three years. This decline has led to increased refinancing activity among borrowers.