The Federal Reserve lowered its key interest rate by a quarter-point on Wednesday, marking the first reduction since December. The new short-term rate is now approximately 4.1 percent, down from 4.3 percent. This decision reflects growing concerns about the state of the nation’s labor market.

Fed officials, led by Chair Jerome Powell, had previously maintained the rate this year while assessing the effects of tariffs, stricter immigration policies, and other economic measures from the Trump administration. However, the focus has shifted from inflation, which is slightly above the Fed's two percent target, to employment issues. Recent data shows that hiring has slowed significantly, and the unemployment rate has increased.

The Fed's statement indicated that “downside risks to employment have risen.” Lower interest rates are expected to decrease borrowing costs for mortgages, car loans, and business loans, potentially stimulating growth and hiring.

In addition to the rate cut, the Fed signaled that it anticipates two more quarter-point reductions during the remaining policy meetings this year. This outlook may not align with Wall Street expectations, which had predicted five cuts for the remainder of this year and into next year. Only one Fed policymaker, Stephen Miran, dissented from the decision, advocating for a half-percentage-point cut. Miran was appointed by President Trump and confirmed by the Senate just hours before the meeting.

The Federal Open Market Committee's decision to cut rates comes as it reassesses the balance between its dual mandate of promoting maximum employment and stable prices. The committee noted that job gains have slowed and the unemployment rate has edged up, prompting a more cautious approach to economic growth.

Fed Chair Jerome Powell is scheduled to hold a press conference at 2:30 p.m. ET to discuss the implications of the rate cut and provide further insights into the economic outlook. New projections from the Fed indicate that inflation is expected to end the year at three percent, significantly above the central bank's target, while the unemployment rate is projected to remain at 4.5 percent.