The US Federal Reserve has cut interest rates for the first time this year, reducing borrowing costs by a quarter point as weakness in the jobs market overshadows fears that Donald Trump’s tariffs will worsen inflation.

The rate-setting Federal Open Market Committee lowered the benchmark federal funds target range to 4 per cent to 4.25 per cent, matching Wall Street expectations.

“Job gains have slowed, and the unemployment rate has edged up but remains low,” the FOMC said in a statement, adding that the “balance of risks” had shifted in favour of prioritising its commitment to keep Americans employed over concerns about inflation.

The reduction in borrowing costs follows several economic reports that have shown that hiring in the US has cooled sharply in recent months, while at the same time, the president’s tariffs are still having only a measured impact on inflation.

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It also comes as Trump attacks the Fed and its chair Jay Powell, insisting that the central bank should drastically lower borrowing costs to boost the economy.

“Too Late’ MUST CUT INTEREST RATES, NOW, AND BIGGER THAN HE HAD IN MIND. HOUSING WILL SOAR!!!” the president said on his Truth Social platform on Monday, using his nickname for Powell.

Trump stepped up his assault last month, when he attempted to fire Fed governor Lisa Cook over allegations of mortgage fraud, which she has denied.

Copyright The Financial Times Limited 2025