On September 18, 2025, the U.S. Federal Reserve announced in Washington that it would lower the Benchmark Interest Rate by 25 basis points, marking a shift towards a more accommodative monetary policy. This decision, though widely anticipated, was not unanimous. Board member Stephen Milan advocated for a more significant rate cut, reflecting differing views among decision-makers regarding the economic outlook.

The interest rate cut has immediately triggered a chain reaction in the global financial markets. Gold prices have broken through the $3,700/ounce barrier, and the three major U.S. stock indices have risen together, showing investor optimism towards improved liquidity. For the general public, this means that borrowing costs for mortgages and auto loans may gradually decrease, but it could also lead to lower deposit and investment yields.

For businesses, especially small and medium-sized enterprises that are sensitive to interest rate changes, the improvement of the financing environment is expected to alleviate cash flow pressure and is beneficial for maintaining investment and employment. However, from a global perspective, the decline in US dollar interest rates may trigger capital flows to emerging markets, bringing challenges in terms of exchange rate fluctuations and capital movements to some countries.

The Federal Reserve's latest Summary of Economic Projections (SEP) shows that officials expect the median federal funds rate to decline to 3.6% by the end of 2025, suggesting there is about 50 basis points of room for rate cuts within the year. The dot plot further indicates that rates will continue to decline in 2026 and 2027, with the long-term neutral rate being raised to 3.1%, seemingly signaling the "high interest rate era" is coming to an end.

However, the Federal Reserve emphasizes that future decisions will "depend on data" rather than a preset path. If inflation rebounds or unexpected changes occur in the labor market, the interest rate cut process may face adjustments. Each policy meeting will be a process of seeking a balance between employment, inflation, economic growth, and risks.

The decision to cut interest rates marks an important turning point in the United States monetary policy, and its impact will extend far beyond the U.S. mainland, profoundly affecting the global economic landscape. Central banks, financial institutions, and investors around the world will closely monitor the Federal Reserve's subsequent actions, as well as the ripple effects of this policy shift on global financial markets and economic growth.