Rate Cut Marks Start of Fed’s Shift Toward Neutrality

September 17, 2025 — The Federal Reserve cut its benchmark interest rate by a quarter percentage point at the September FOMC meeting, lowering the federal funds target range to 4.00%–4.25% in its first reduction since December. The move, widely expected by markets, reflects growing concern over a cooling labor market even as inflation remains above the Fed’s 2% goal. Officials also confirmed that balance sheet runoff will continue under existing caps, signaling that quantitative tightening remains in place despite the shift in rates.