First reduction since 2024 shrinks US-Korea rate gap to 1.75 pts, easing capital-flow pressure and imported-energy costs

The U.S. Federal Reserve cut its benchmark interest rate by a quarter point Wednesday (Thursday Seoul time), lowering the target range for the federal funds rate to 4.00 to 4.25%, its first reduction since Dec. 2024. The Federal Open Market Committee said growth in economic activity had “moderated,” job gains had slowed and unemployment had edged up, while inflation “has risen recently and remains somewhat elevated.” The Fed said it would continue reducing its holdings of Treasury and agency securities and stood ready to adjust policy if risks to its dual mandate of maximum employment and stable prices emerged.

Fed Chair Jerome Powell told reporters that the median projection of Fed policymakers now calls for the federal funds rate to fall to 3.6% by year-end, implying two additional quarter-point cuts. He said U.S. GDP is expected to expand 1.6% in 2025 and the unemployment rate to reach 4.5% before edging lower. Powell warned that tariffs have begun to push up goods prices and that lower immigration is constraining labor supply, noting that “risks to inflation are tilted to the upside and risks to employment to the downside.”

The U.S. Federal Reserve cut its benchmark interest rate by a quarter point Wednesday (Thursday Seoul time), lowering the target range for the federal funds rate to 4.00 to 4.25%, its first reduction since Dec. 2024. The Federal Open Market Committee said growth in economic activity had “moderated,” job gains had slowed and unemployment had edged up, while inflation “has risen recently and remains somewhat elevated.” The Fed said it would continue reducing its holdings of Treasury and agency securities and stood ready to adjust policy if risks to its dual mandate of maximum employment and stable prices emerged.

Fed Chair Jerome Powell told reporters that the median projection of Fed policymakers now calls for the federal funds rate to fall to 3.6% by year-end, implying two additional quarter-point cuts. He said U.S. GDP is expected to expand 1.6% in 2025 and the unemployment rate to reach 4.5% before edging lower. Powell warned that tariffs have begun to push up goods prices and that lower immigration is constraining labor supply, noting that “risks to inflation are tilted to the upside and risks to employment to the downside.”

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