by Erich Rumson ’28 on September 25, 2025
National and Global News
On Wednesday, Sept. 17, the Federal Reserve voted to cut its interest rate by a quarter-point in response to slower labor market gains. The move comes after President Trump had been demanding for months that the Fed make major rate cuts to help spur economic growth.
The quarter-point rate cut is the first made in over nine months, and according to the Wall Street Journal, some officials have signaled further cuts are due later this year. One of the chief reasons given for lowering the rates is a recent slowdown in hiring nationwide. The latest cut will lower the current rate to a range of 4-4.25 percent, its lowest point in three years.
One might ask: How does a lower interest rate affect the economy exactly? Should PC students care about this recent rate cut? The Cowl reached out to Dr. Limnios from the Economics Department for his insight on these questions. In his response, Dr. Limnios compared the interest rate to a gas pedal: when it is lowered, it speeds up the economy, and when it is raised, it slows things down. In his words, “If the Fed lowers the cost of borrowing enough, more investments are funded and the economy’s productive capacity grows; if interest rates are raised, then less investments are funded and the productive capacity of the economy shrinks.” When asked about the impact decisions like lowering the interest rate have on PC students, Dr. Limnios emphasized how borrowing money and managing debt is an important part of any business, and that business students should be aware of the Fed’s monetary policy and its effect on their financial decisions. He also mentioned the impact that interest rates have on PC students who want to own a home, as the rate set by the Fed affects the amount paid on mortgages.
For the past few years, the Federal Reserve kept its interest rates high in an effort to combat rising inflation. From August 2023 to August 2024, the policy rate was at 5.33 percent—its highest point in nearly two decades. As inflation has gradually lowered recently, the need for higher interest rates has declined, making the recent cuts possible. There is also now a need to stimulate the economy, as the number of jobs added to the labor market in recent months has been lower than expected. While the economy remains solid overall, the Fed sees a rate cut as a way to help boost the lagging labor market.
The most recent cut was not without controversy, however, as it comes after a months-long effort on the part of President Trump to bring down interest rates he argued were too high. Federal Reserve Chairman Jerome Powell had until recently resisted Trump’s calls, which led to harsh criticism from the President. Last week, two days before the rate cut, Trump senior adviser Stephen Miran was sworn in before the Senate as a new Fed governor. Miran has shared the President’s desire to lower interest rates and has called for a half-point rate cut, twice the size of last week’s modest quarter-point cut.
The full impact of the recent Fed decision remains to be seen, as it may take time for it to affect the overall economy. The stock market made modest gains in the aftermath of the decision, which may hopefully be a sign of future growth.