Fed Update: Rate cut amid shaky US jobs market

US monetary authorities moved to support a fragile labor market, cutting policy interest rates for the first time in 2025.

In a widely expected move, the US Federal Reserve (Fed) reduced the Federal Funds Target Rate (FFR) to 4.00%-4.25% during the latest Federal Open Market Committee (FOMC) meeting, with a 11-1 vote.

Key points

• Fed Chair Jerome Powell says the Fed now finds itself in a “meeting-by-meeting situation” when it comes to future rate cuts.
• The labor market has now become the priority for the Fed amid signs of weakness despite inflation still remaining “relatively elevated.”
• The Fed’s dot plot moved lower in the latest Summary of Economic Projections (SEP) amid concerns on downside risks to the labor market despite upside risks to inflation.

What now

•  Metrobank adjusted its forecasts and now expects the Fed to deliver two more 25-basis point (bp) cuts for the rest of the year, in line with the Fed’s dot plot. This will bring the target FFR to 3.50%-3.75% by year-end.
• For 2026, we still expect the Fed to deliver another cumulative 100 bps worth of cuts, bringing the target FFR to 2.50%-2.75%.

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ECONOMIC UPDATES

Policy rate views: Fed expected to do baby steps

Powell and company find themselves in a “meeting-by-meeting” situation

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