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Federal Reserve Makes First Rate Cut of 2025 — What It Means

by Tim Macarak on Sep 18, 2025

 

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Cutting Into the Unknown
 
The Federal Reserve finally pulled out the scissors and snipped its first rate cut of 2025: 25 basis points, taking the fed funds rate down to 4.00%–4.25%. This September 2025 Fed rate cut marks the first policy shift of the year. But the bigger story isn’t today’s trim — it’s the note taped to the mirror: two more cuts expected before year-end.
 
So Powell & Co. aren’t just offering a quick trim, they’re penciling in the full holiday haircut package. And in the Fed’s ongoing parlor game of “which risk is worse,” this meeting leaned toward the labor market as the bigger worry over inflation.
Jerome Powell’s Key Takeaways
 
  • Two-Sided Risk (aka No Free Lunch): Powell’s big line today:
    “So we have a situation where we have two-sided risk, and that means there’s no risk-free path.”
  • Translation: the Fed is worried about two things at once, stubborn inflation and a weakening job market. It is concerning when the guy running the monetary system basically admits he’s choosing between the fire and the frying pan.
  • Risk Management Cut: Powell labeled this a “risk-management” move, Fed-speak for “we’re not really sure which way things are breaking, but we’re going to ease a little just in case.” That’s not exactly a confidence booster, but at least he said it with a straight face.
  • The SEP and Dot Plot: For those new to Fed bingo, SEP = Summary of Economic Projections. Every quarter, Fed governors and presidents submit forecasts for growth, unemployment, inflation, and most fun of all, where they think interest rates are going. These get turned into the famous “dot plot.”
    • The median forecast shows two more cuts this year, but views were notably divergent.
    • Inflation expectations? Roughly the same as June (around 3%).
    • GDP growth? About the same too, a hair higher (1.6%).
    • Translation: the economy hasn’t changed much, but the Fed is feeling twitchier.

  • The Outlier: Stephen Miran
    Newly sworn-in Governor Stephen Miran immediately made his presence known by dissenting and calling for a 50-basis-point cut. Nothing like showing up to your first day of work and telling everyone they’re being too timid.
Market Response to the September 2025 Fed Rate Cut
 
  • Equities: Markets barely blinked at the 25bps cut — they saw this coming. The real juice was Powell’s hints at more cuts to come.
  • Treasuries: The 10-year yield bounced a few basis points as investors squinted at the SEP and thought, “Is this actually dovish or just Powell hedging again?”
  • Dollar: The greenback flexed a little, not a massive move, but enough to remind people it’s still the world’s reserve currency.
  • Gold: Our shiny old friend kept running, feeding on lower real yields, global uncertainty, and perhaps a general sense that nobody trusts paper anymore.
Political Theater: Drama Inside the FOMC
  • Lisa Cook: Trump tried to fire her, but a court ruling said “nope.” So she walked into the FOMC meeting the next morning, very much still employed.
  • Stephen Miran: Approved by the Senate literally yesterday. Less than 24 hours later, he’s already throwing elbows with a call for a double-sized cut. Subtlety isn’t his thing, but he’s definitely making headlines.
Conclusion & Commentary
The bottom line: The Fed cut 25bps today and penciled in two more cuts before Santa arrives. Inflation forecasts barely budged, growth is steady, and unemployment is edging higher. In other words, the economic dashboard is flashing both red and yellow.
 
Powell is calling this “risk management.” Translation: he’s juggling knives while blindfolded. Markets will keep parsing every word and dot until the next meeting, but for now, the Fed is in easing mode.
 
For clients: This is where discipline matters most. Markets will swing on every Fed whisper, but our job is to keep your plan steady — rebalancing when opportunities arise, managing risk, and remembering that no SEP dot plot has ever been perfectly accurate.
 
From an investment standpoint, nothing in this meeting changes the broader trajectory: U.S. stocks, international equities, and gold have all performed well in 2025. That said, with U.S. equity valuations looking stretched, our guidance remains to maintain your target allocations rather than chasing performance.
 
Wondering how these cuts could affect your portfolio? Let’s talk. 
 

 

Investment strategies, including rebalancing, do not guarantee improved performance and involve risk, including potential loss of principal. Past performance does not guarantee future results. The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.

 

About the Author – Tim Macarak CFP®

Tim Macarak is President & Head of Wealth Management at Member’s Wealth, a boutique wealth management firm that offers a comprehensive approach to serving individuals, families, business owners, and institutions. The firm’s goal is to preserve and grow its clients’ wealth to endure overtime, while thoughtfully evolving its strategy to suit an ever-changing world. With over 20 years of wealth management experience, Tim and the Members' Wealth team thrive on bringing clarity and confidence to clients' unique situations. He believes everyone needs sound financial advice from someone whose interests are aligned with theirs and is determined to put service before all else.

Tim is a CERTIFIED FINANCIAL PLANNER® Professional. Outside work, he enjoys spending time with his wife and kids, Skiing, Coaching, and Traveling. To learn more about Tim, connect with him on LinkedIn.

To get in touch with the Members’ Wealth team today, I invite you to email info@memberswealthllc.com or call (267) 367-5453. 

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