Research
September 17, 2025
Monetary Policy
Federal Reserve lowers interest rates, signals possible further cuts this year
As expected, the Federal Open Market Committee (FOMC) lowered short-term interest rates by 25 basis points at its September 16–17 meeting, the first decrease in the federal funds rate since December. The new target range now stands at 4.00 to 4.25 percent.
This decision reflects growing concerns about a cooling labor market. As the FOMC noted, “Job gains have slowed, and the unemployment rate has edged up but remains low.” The Fed continues to proceed cautiously, acknowledging that “inflation has moved up and remains somewhat elevated.” The statement also observed, “Uncertainty about the economic outlook remains elevated.”
Overall, the FOMC reaffirmed its commitment to its dual mandate of maximum employment and 2% inflation. Policymakers emphasized that future rate decisions will be data-dependent, with a continued focus on achieving greater policy clarity.
A notable dissent came from Stephen I. Miran, the newest member of the Federal Reserve Board of Governors, who advocated for a more aggressive 50 basis point cut to a range of 3.75 to 4.00 percent.
Looking ahead, the median projections from FOMC participants point to two additional rate cuts in 2025. With two meetings remaining this year—October 28–29 and December 9–10—this outlook suggests a potential 25 basis point reduction at each.
Fed officials now forecast GDP growth of 1.6% in 2025 and 1.8% in 2026, up from June projections of 1.4% and 1.6%, respectively. The unemployment rate is expected to rise to 4.5% this year, while core PCE inflation is projected to reach 3.1% in 2025 before easing to 2.6% in 2026.
For the restaurant industry, elevated interest rates continue to weigh on borrowing costs, delaying expansion plans and capital investments. A lower rate environment could help ease credit burdens, bolster consumer spending, and support demand in sectors sensitive to discretionary income, including for foodservice and hospitality.
This decision reflects growing concerns about a cooling labor market. As the FOMC noted, “Job gains have slowed, and the unemployment rate has edged up but remains low.” The Fed continues to proceed cautiously, acknowledging that “inflation has moved up and remains somewhat elevated.” The statement also observed, “Uncertainty about the economic outlook remains elevated.”
Overall, the FOMC reaffirmed its commitment to its dual mandate of maximum employment and 2% inflation. Policymakers emphasized that future rate decisions will be data-dependent, with a continued focus on achieving greater policy clarity.
A notable dissent came from Stephen I. Miran, the newest member of the Federal Reserve Board of Governors, who advocated for a more aggressive 50 basis point cut to a range of 3.75 to 4.00 percent.
Looking ahead, the median projections from FOMC participants point to two additional rate cuts in 2025. With two meetings remaining this year—October 28–29 and December 9–10—this outlook suggests a potential 25 basis point reduction at each.
Fed officials now forecast GDP growth of 1.6% in 2025 and 1.8% in 2026, up from June projections of 1.4% and 1.6%, respectively. The unemployment rate is expected to rise to 4.5% this year, while core PCE inflation is projected to reach 3.1% in 2025 before easing to 2.6% in 2026.
For the restaurant industry, elevated interest rates continue to weigh on borrowing costs, delaying expansion plans and capital investments. A lower rate environment could help ease credit burdens, bolster consumer spending, and support demand in sectors sensitive to discretionary income, including for foodservice and hospitality.