Jerome Powell-led Federal Reserve gives first interest rate cut of 2025; Dow Jones rises

As widely anticipated, the Jerome Powell-led US Federal Reserve on Wednesday, September 17, slashed its key interest rate by 0.25 percentage points to bring it to a range of 4.00%–4.25%. The move aims to support economic growth amid worries over a slowing US labour market and rising inflation. The Fed signalled that further rate cuts may follow later in the year, depending on economic conditions.

What does the “dot plot” indicate?

After announcing their latest rate decision, officials shared their updated “dot plot”(a chart showing each member’s prediction for future rate changes). Most expect two more rate cuts before the year ends, according to a report on CNBC, with opinions varying widely.One dot, possibly from Miran, who strongly supports lower rates, suggests a big drop of 1.25 percentage points, the report added. The chart doesn’t name anyone, but each dot represents one person’s view.

The CNBC report further indicated that out of 19 members:
– 10 expect two more cuts, likely in October and December– 9 expect just one more cut

– 1 doesn’t want any cuts at all, not even the one just made

How did Wall Street react?

Following the rate cut, US stock markets showed mixed reactions. The Dow Jones Industrial Average rose nearly 0.5%, while the S&P 500 dipped 0.2%, and the Nasdaq Composite fell over 0.4%. Investors remain cautious, awaiting further signals from the Fed and economic data.