US Federal Reserve Cuts Interest Rates for the First Time in 2025, Impacting the Dollar, Stock Market, and Goods Price

Strategic Insights -

The US Federal Reserve (Fed) announced its first interest rate cut in 2025, a move that immediately affected the dollar, the stock market, and the price of goods. Fed President Jerome Powell stated that this was a risk management measure in response to the weakening labor market, emphasizing that the Fed does not need to rush to further loosen loan interest rates. The Fed reduced the loan interest rate by 25 basic points, lowering it to 4.0-4.25%, and expects to make another two cuts this year.

Key Takeaways:

  • The Fed's first interest rate cut in 2025 was a risk management measure to respond to the weakening labor market.
  • The Fed reduced the loan interest rate by 25 basic points, lowering it to 4.0-4.25%.
  • The Fed expects to make another two cuts this year and forecasts a 50 basic point cut in 2026 and 2027.
  • The Fed expects this year's growth rate to reach 1.6%, higher than the previously forecast 1.4%.
  • The year-end unemployment rate may be 4.5%, with the personal spending index (PCE) forecast to be 3% this year and 2.6% next year.
  • The Fed's reference capacity applies to interbank loans, which affects lending interest rates and savings.
  • The dollar index plummeted to 96,224 points, its lowest level since February 2022, but later recovered to 97,074 points (up 0.44%).
  • The pound held at 1.3626 USD, compared to the USD 1.3726 recorded on September 17.
  • In Japan, the dollar decreased by 0.08% to 146,815 yen, touching its lowest level since July 7 before increasing sharply.
  • The Australian dollar (AUD) was stable at 0.6655 before announcing employment data.
  • The Canadian dollar (CAD) held at 1.3772/USD after the central bank cut the interest rate by 0.25 percentage points to the lowest level in three years.

Statistics:

  • The dollar index plummeted to 96,224 points, its lowest level since February 2022, but later recovered to 97,074 points (up 0.44%).
  • The pound held at 1.3626 USD, compared to the USD 1.3726 recorded on September 17.
  • In Japan, the dollar decreased by 0.08% to 146,815 yen, touching its lowest level since July 7 before increasing sharply.
  • The Australian dollar (AUD) was stable at 0.6655 before announcing employment data.
  • The Canadian dollar (CAD) held at 1.3772/USD after the central bank cut the interest rate by 0.25 percentage points to the lowest level in three years.
  • The Fed expects this year's growth rate to reach 1.6%, higher than the previously forecast 1.4%.
  • The year-end unemployment rate may be 4.5%.
  • The personal spending index (PCE) is forecast to be 3% this year and 2.6% next year.
  • The dot plot scheme shows that the Fed is expected to cut more than 50 basic points in the last two meetings of the year, but only one more reduction in 2026.

Sources:

  • Euclid Infotech Pvt. Ltd., "US Federal Reserve Cuts Interest Rates for the First Time in 2025, Impacting the Dollar, Stock Market, and Goods Price", September 18, 2025.
  • Westpac, "US Federal Reserve Cuts Interest Rates for the First Time in 2025, Impacting the Dollar, Stock Market, and Goods Price", September 18, 2025.