Facing pressure from the Trump administration, the Federal Reserve cut its benchmark interest rate by a quarter of a percentage point on Wednesday. Here is the latest on this developing situation and what it may mean for the sagging labor market and economy as a whole.

Fed Reserve Votes to Cut Interest Rate by a Quarter of a Percentage Point

The Wednesday decision by the nation's central bank to cut the benchmark interest rate by a quarter point marked the first reduction since the start of President Donald Trump's second term. However, the size of the rate cut was less than what the president had wanted.

It has been nine months since the last time the Fed slashed interest rates. The funds rate now comes in between 4% and 4.25%. The Federal Open Market Committee (FOMC) signaled that it will roll out two more quarter-point rate cuts by the end of the year.

The Fed is working to keep inflation rates low while also maximizing employment in the U.S. When talking to reporters after the announcement in Washington, D.C., Fed Chair Jerome Powell said that it was challenging to balance the concerns over the rising inflation rates with worries over the struggling labor market.

Powell specifically expressed concern for minority unemployment rates. For instance, the unemployment rate for Black workers hit 7.5% in August. This is the highest-level dating back to October 2021. This figure is important, as unemployment rates for the Black population often signal a slowdown for the job market overall. Powell also noted that younger people are more vulnerable to economic uncertainty.

The Fed and the Trump Administration

Powell and his colleagues had been under fire recently by the White House as Trump sought to pressure the agency to cut rates. Most recently, Trump launched a campaign to fire one of the Fed's board of governors while moving to secure the confirmation of another. After Trump moved to fire board member Lisa Cook, she sued the president, noting that the firing violated her legal rights as a worker at an independent government agency.

Trump defended his decision, saying he removed her from the board in light of mortgage fraud allegations. While federal law gives the president the power to remove a Fed board member, it has never been executed in the entire 112-year history of the bank. The decision is still working its way through the courts, with Cook's future with the Fed uncertain.

Meanwhile, top White House economic advisor Stephen Miran was confirmed on Monday by the Senate to serve on the board. The razor-thin margin came in at 48 - 47. The vote allowed Miran to cast a vote on Wednesday regarding the decision to cut interest rates. Miran was the only member of the Fed board who voted for a larger half-point rate reduction.

While Miran has repeatedly said that he will comply with the central bank's independence, he said that he will not resign from his position within the Trump White House. This is raising questions from Democrats about the inherent bias built into the Fed.

On Monday, Trump renewed his pressure on the Fed to slash rates. The president posted on social media that the interest rate cuts must be "bigger." However, Powell said on Wednesday that the agency is "strongly committed" to maintaining its independence from the White House.

Stock Market Reacts to Rate Cut

As expected, the U.S. stock market was taken for a ride on Wednesday on the news of the interest rate cuts. Stocks within all three major indexes bounced around throughout the day as investors reacted to the small rate cut.

The Dow finished the day up 260 points, for a gain of 0.6%. This came after reaching an all-time high earlier in the day and also spending part of the trading cycle briefly in the red. The Nasdaq Composite fell by 72 points while the S&P 500 slipped about 6 points.

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