In September 2025, the Federal Reserve reduced the federal funds rate by 25 basis points, adjusting it to a range of 4.00% to 4.25%, aligning with market expectations. This marks the first decrease in borrowing costs since December. Notably, newly appointed Governor Stephen Miran dissented, advocating for a deeper cut of half a percentage point. The central bank also unveiled updated economic forecasts, indicating plans to further decrease rates by an additional 50 basis points by the close of 2025, followed by a quarter-point reduction in 2026, slightly exceeding the projections made in June.
Revised GDP growth figures show an upward trend, with 2025 projections at 1.6% (up from June's 1.4%), 2026 at 1.8% (up from 1.6%), and 2027 at 1.9% (compared to an earlier estimate of 1.8%). The Personal Consumption Expenditures (PCE) inflation rate remains projected at 3% for the current year, consistent with June's forecast, but has been adjusted upwards for 2026 to 2.6%, from the previous 2.4%. Similarly, the Core PCE inflation forecast holds at 3.1% for 2025, while it's adjusted to 2.6% for 2026, up from 2.4%. The unemployment rate is still anticipated to be 4.5% for 2025, but the expectation for the following year has been revised to 4.4% from the prior 4.5%.
