17.09.2025 21:10
The U.S. Federal Reserve (FED) lowered the policy interest rate by 25 basis points, bringing it to a range of 4.00-4.25, in line with expectations. Following the FED's decision to cut rates by 25 basis points, there was a strong recovery in U.S. markets, while the dollar index fell by 0.3%. The euro/dollar exchange rate increased by 0.25%, reaching 1.1895, marking the highest level in the last four years.
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The Federal Reserve (FED) lowered the policy interest rate by 25 basis points to a range of 4 - 4.25 percent at its September meeting. The median expectation in the Bloomberg survey was also for a 25 basis point cut.
The interest rate decision was made with a vote of 11 to 1. Stephen Miran, who was appointed to the FED Board of Governors by Trump, voted for a 50 basis point cut. The members' expectation for the interest rate at the end of 2025 was 3.6 percent, down from the previous 3.9 percent.
NOTABLE INFLATION DETAIL
The decision text stated that downside risks to employment have increased and that inflation is 'somewhat' high.
NO CHANGE SINCE DECEMBER
FED officials have not changed interest rates since December to see the impact of President Donald Trump's aggressive policies on the economy. In the last meeting in July, while the FED did not change rates, FED officials Michelle Bowman and Christopher Waller voted against the decision.
FIRST MARKET REACTION TO THE INTEREST RATE DECISION
Following the FED's decision to cut interest rates by 25 basis points, there was a strong recovery in the US markets. The Russell 2000 index, which tracks small-cap stocks, rose by 2 percent, approaching record levels for the first time since 2021. The Dow Jones Industrial Average rose by more than 1 percent, while the technology-heavy Nasdaq index erased its intraday losses and turned flat.
DOLLAR LOST VALUE
In the foreign exchange market, the dollar lost value. The Dollar Index fell by 0.3 percent, while the euro/dollar exchange rate increased by 0.25 percent to reach 1.1895, marking the highest level in four years. There was also notable activity in the commodity markets. Gold prices rose above $3,697, testing the session's peak. The increased risk appetite following the interest rate cut and the weakening of the dollar supported demand for the precious metal.
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