Fed Cuts Interest Rate by Quarter Point Amid Trump Pressure, Shutdown Uncertainty
The Federal Reserve delivered its second interest rate cut of the year on Wednesday, lowering its benchmark federal funds rate by a quarter point amid persistent pressure from President Donald Trump and growing economic strain tied to the Democrat-led government shutdown.
The Federal Open Market Committee voted 10–2 to reduce the federal funds rate to a range of 3.75 percent to 4 percent, signaling caution over softening job growth and uneven inflation trends. The move follows a similar rate cut in September and had largely been anticipated by financial markets. Still, the Fed’s statement and remarks from Chair Jerome Powell suggested the central bank is reluctant to commit to additional easing.
“A further reduction of the policy rate in December is not a foregone conclusion — in fact, far from it,” Powell told reporters. “We remain committed to supporting maximum employment, bringing inflation sustainably to our 2 percent goal, and keeping longer-term expectations well anchored.”
Powell also acknowledged the ongoing shutdown — now in its third week — will temporarily drag on the economy. But he insisted the damage will be short-lived.
“The shutdown of the federal government will weigh on economic activity while it persists,” Powell said. “But these effects should reverse when the shutdown ends.”
The move comes after President Donald Trump publicly urged the Fed to act more aggressively to protect American workers and businesses during the shutdown. The president has repeatedly criticized Powell for being slow to react to shifting economic conditions, even referring to him as “Jerome ‘Too Late’ Powell.”
“Jerome ‘Too Late’ Powell must NOW lower the rate,” Trump wrote on Truth Social, accusing the central bank chief of “gross incompetence.”
Powell — first appointed in 2018 and reappointed by Trump in 2022 — did not address the criticism directly. However, he emphasized that the central bank’s decisions are based on economic data, saying the committee operates “based on economic data and analysis, not political considerations.”
The committee saw internal disagreement. Trump-nominated Fed Governor Stephen Miran argued for a deeper 50-basis-point cut to counter cooling investment and slowing consumer demand. Kansas City Fed President Jeffrey Schmid, by contrast, opposed any cut at all, warning that pushing rates lower could fuel inflation and erode the Fed’s flexibility.
Markets responded cautiously. The Dow jumped nearly 200 points immediately after the announcement before surrendering gains as Powell signaled uncertainty about future cuts. Bond yields fell, while the dollar slid modestly against other major currencies.
The rate adjustment also reflects the Fed’s attempt to maintain stability amid the shutdown, which has furloughed thousands of federal workers and delayed critical data releases used to guide policy decisions.
“Without complete data, we have to rely more heavily on private indicators and surveys,” Powell said.
The White House said the decision shows the effectiveness of President Trump’s pressure campaign to ensure the Fed remains focused on economic growth.
“The president has been clear from day one — lower rates mean stronger growth,” a senior administration official said. “He’s fighting for American workers and consumers, and the Fed is finally catching up.”
Powell’s current term runs through May 2026, though Trump has already signaled he intends to nominate a successor “more aligned” with his pro-growth monetary approach.
For now, Powell emphasized caution and flexibility:
“We will continue to make decisions meeting by meeting,” he said, “based on the totality of incoming information and the outlook for the economy.”
Analysts say the cut may help ease strain in credit markets while Washington continues to negotiate an end to the shutdown — but warn the central bank may soon face difficult trade-offs if inflation remains elevated.