The Federal Reserve cut its key interest rate by a quarter point Wednesday, its first reduction since December, and signaled it expects two more cuts this year as concern grows about the slowing labor market.

The move lowered the Fed’s benchmark short-term rate to about 4.1% from 4.3%. Chair Jerome Powell and other officials had held rates steady earlier this year while assessing the impact of tariffs, immigration policies and other Trump administration measures on inflation and growth.

On Tuesday, President Donald Trump said Federal Reserve officials “have to make their own choice” but added they “should listen to smart people like me.” He has argued the Fed should slash rates by three percentage points.

With hiring nearly stalled and unemployment edging higher, the Fed said “downside risks to employment have risen.” Officials noted inflation remains slightly above the 2% target but shifted focus to supporting jobs, saying lower rates could ease borrowing costs for households and businesses.

Policymakers projected two additional cuts in 2025 and one in 2026, fewer than investors had anticipated. The decision passed with one dissent, from Trump appointee Stephen Miran, who pushed for a larger half-point cut.

This is a breaking news article. Updates to follow.

Russell Vought, director of the Office of Management and Budget, center, with President Donald Trump, left and Federal Reserve Chairman Jerome Powell, visit the Federal Reserve, Thursday, July 24, 2025, in Washington.

Associated Press