Fed cuts rates by 0.25% as Powell warns tariffs may lift prices and jobs show more risk
Washington, Sept 17, 2025 — The U.S. Federal Reserve cut its main interest rate by 25 basis points on Wednesday, while Chair Jerome Powell warned that recent price rises and a weaker job market mean the Fed must move carefully. The Fed said downside risks to employment have grown, and Powell said tariffs might push some prices up — a change the central bank will watch closely.
Powell told reporters the central bank was not seeing broad support for a larger, half-point cut and that policy is not set on a fixed path. He described the decision as a “risk-management” move, not a rush to ease policy.
The Fed noted that inflation has risen recently and remains somewhat above its 2% goal. Powell said much of the recent rise in prices has come from goods — in part because of tariffs — and that the Fed’s base view is that those tariff effects will be short-lived. Still, he warned the bank must guard against the risk that tariff-driven price rises become persistent.
On jobs, Powell and the Fed said the balance of risks has shifted: downside risks to employment have increased. Powell pointed to a marked slowing in both demand for workers and the supply of workers — in part because immigration flows have changed — and said that any sharp rise in layoffs could happen quickly. This change in the labor picture helped inform the Fed’s decision to act now.
Markets reacted quickly. U.S. Treasury yields moved and some stock indexes fell after the announcement and Powell’s comments. Traders also noted a sharp move in the 10-year Treasury yield and a slide in technology shares during the session. Analysts say investors will now watch incoming inflation and jobs data for signs the Fed will cut more later in the year.
What this means for the economy (in simple terms)
Borrowing costs are a bit lower now, after a 0.25% cut. This can help businesses and borrowers.
Inflation is still above target, and the Fed is watching whether price rises from tariffs last. If they do, the Fed could slow future cuts.
Jobs are weaker than before; the Fed sees more risk that layoffs could rise, which makes it more likely the Fed will act to support employment if data worsen.
Quick facts (for readers and search engines)
Rate cut: 25 basis points (0.25%).
Fed view on tariffs: Could raise goods prices now; base case is short-lived, but risk exists for persistent inflation.
Labor market: Fed says downside risks to jobs have risen.
Watch next: Job reports, consumer price data, and any new comments from Fed officials. These will guide whether the Fed will cut rates again.
Sources: Federal Reserve press release and press conference; Reuters and Bloomberg market coverage.
