The Fed cuts interest rates a quarter of a point amid pressure from Trump.

WashingtonNine months after keeping interest rates frozen at around 4.25%, the US Federal Reserve has cut the price of money by 0.25 percentage points. Wednesday's meeting was not a typical one, because for the first time the White House has set foot on the doorstep of the US central bank: the cut, inevitably, is marked by pressure from President Donald Trump.

In fact, normality was not present in the board's vote either: one of the new governors, Stephen Miran, was chosen by Trump and was only just ratified by the Senate on Monday. Another, Lisa Cook, has been shining in the courts for days with the US president's attempts to remove her.

In recent months, central bank officials have been weighing and calculating the delicate balance between rising inflation—which remains far from the 2% target—and unemployment data. Days before the central bank's meeting, with the consolidation of weak employment data, everything indicated that concerns about the cooling labor market would eventually prevail over concerns about high inflation, which rose to 2.9% in August. The cut also pleases President Trump, who has been verbally harassing the institution to lower rates and has repeatedly threatened to fire Fed Chairman Jerome Powell for failing to do so.

During these months, Powell has been talking about balances precisely because lowering rates has an inflationary effect while also helping to stimulate job creation. With the consolidation of a downward trend in jobs, it finally seems that the Fed is willing to accept the price consequences of a rate cut.

A slowdown in the labor market is usually one of the first warning signs of a possible recession. In the summer of 2024, in the midst of the election campaign, the markets have already panicked when the US July employment data was released. The numbers that sent the stock market into a tailspin were these: 114,000 jobs had been created (far fewer than expected) and the unemployment rate had risen to 4.3%. A year and a half later, the numbers are familiar.

"Recent indicators suggest that economic growth has moderated GDP growth," Powell explained at the press conference, where he pointed to the cooling labor market as the main reason for this moderation in GDP. Furthermore, the Fed chairman pointed to "low immigration" as one of the causes of the slowdown in employment. In June, farmers in rural areas were complaining about immigration raids in their fields because they were driving away labor. Even Trump had to acknowledge the negative impact of the indiscriminate arrests.

The Fed chairman also explained that "government policies continue to evolve, and their effects on the economy remain uncertain." Trump's tariffs are one of those factors of uncertainty and "have begun to raise prices on some goods, but their full effects on the economy and inflation are not yet visible."

He postpones achieving 2% inflation.

Faced with the inflationary risk that a rate cut could entail, Powell asserted: "For me, the risk of higher and more persistent inflation has probably diminished." But he could not help but acknowledge that the goal of reaching 2% inflation by 2026 has vanished. The Fed chairman acknowledged that it will likely not be until 2028, two years later than expected, that the target will be reached. "We are on track to reach 2% inflation by the end of 2028," Powell stated.

As if the atmosphere weren't already strained enough, Miran cast his vote as the new governor without having attended any of the preliminary meetings. He was sworn in just yesterday and had already announced that he would only take a leave of absence from his position as chairman of the White House Council of Economic Advisers until the vacancy expires, on January 31 of next year.

Regarding Miran's intervention within the board of governors, Powell denied that the Trump loyalist jeopardizes the Fed's independence. "We are committed to maintaining independence, and I don't have much more to say," he said. There were fears that Miran would push for further rate cuts during today's session.

One of the reasons Trump wants the Fed to lower the price of money is to make US debt cheaper for the White House. In August, the Treasury Department reached a record level of public debt: $37 trillion. Even with the revenue Trump expects to obtain from tariffs, it is still likely that the country will register a deficit of approximately 6% this year.

Meanwhile, the Fed's cracked independence continues to hang by a thread in the courts. On Monday, Cook achieved another legal victory: an appeals court rejected the Trump administration's appeal blocking its attempt to fire her. Still, the Republican administration is already preparing another. The president has tried to remove Cook based on allegations of mortgage fraud that have not been proven in court. If Trump wins in court and creates the precedent of being able to remove the bank's governors based on accusations alone, the Fed's independence could crumble.

Powell already timidly opened up to cutting the price of money in August, amid concerns about the latest unemployment data. "The balance of risks appears to be shifting," said the Fed chairman, who defined it as "a curious kind of balance resulting from a marked slowdown in both the supply of and demand for workers." The slowdown Powell was referring to was the employment data released by the Bureau of Labor Statistics, which indicated that only 73,000 new jobs were created in July, well below the 110,000 that analysts had expected.

Enraged, Trump fired the director of the Bureau of Labor Statistics, Erika McEntarfer, accusing her of manipulating the data. In her place, he has now appointed economist EJ Antoni of theHeritage Foundation,he think tank ultraconservative who propelled the Republican's candidacy and created Project 2025. Even so, the August jobs report data hasn't been much better and continues to challenge the prosperous portrait the president insists on painting. Last month, only 22,000 jobs were created, and the unemployment rate rose slightly, from 4.2% to 4.3%, its highest in nearly four years. On the other hand, the revised employment data concluded that 13,000 jobs had already been lost in June, the first net loss since late 2020, in the midst of the pandemic.