Federal Reserve Initiates Rate Cuts Signal Broad Monetary Easing in 2025

The Federal Reserve has initiated a shift toward lowering interest rates, marked by a 0.25% cut in September 2025, signaling the start of an easing cycle aimed at supporting growth while managing inflation risks. San Francisco Fed President Mary Daly emphasized the need for rate cuts as the labor market has reached equilibrium, cautioning against weakening employment while ensuring inflation returns to the 2% target. In contrast, Atlanta Fed President Raphael Bostic sees little reason for further cuts immediately, citing ongoing inflation concerns and rising risks to employment. Market expectations include additional rate reductions before the end of 2025, with futures pricing in a cumulative cut of at least 0.5%, contributing to record highs in major U.S. stock indexes and significant inflows into equities. Fed Chair Jerome Powell characterized the recent rate cut as a "risk management cut" and highlighted persistent inflation pressures despite signs of economic softening. The overall Fed sentiment has turned dovish, with policymakers indicating a cautious but gradual approach to lowering rates, balancing inflation control and labor market stability.