January 1, Fed Rate Cut Stirs Debate Over Economy’s Path

Wyatt’s Take

• Fed lowers interest rates, hoping to help Americans struggling with costs.
• Dissension inside the Fed Board over how aggressive to be.
• Wall Street reacts, but Main Street still waits for real changes.

The Federal Reserve shaved its key interest rate by a quarter percent to a 4% to 4.25% range, trying to give a little relief as people wrestle with higher prices and slower job growth. This is the first cut since December 2024.

The move followed an 11-1 vote, with new Fed Governor Stephen Miran wanting a bigger half-point cut due to job market weakness. Other governors, once skeptical, sided with the majority this time.

Fed Chair Jerome Powell called this a “risk management cut.”

“We have begun to see goods prices showing through into higher inflation, and actually the increase in goods prices accounts for most of the increase in inflation, or perhaps all of the increase in inflation over the course of this year,” Powell said.

“Those are not very large effects at this point, and we do expect them to continue to build over the course of the rest of the year and into next year,” he added.

President Trump has been urging bigger rate cuts, but Powell and the Fed are taking a slower approach. Trump’s economic advisors say slow and steady might work, but folks on the ground want to see results soon.

Markets noticed the cut, with U.S. stock exchanges trading nearly 3.2 billion shares, above recent averages. The S&P 500 rose 0.4% and volatility stayed in check, but it’s too soon to know the real impact for working families.

Only time will tell if this small cut helps anyone outside Wall Street or just kicks the can on bigger issues like inflation and jobs.

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Wyatt Matters

Working Americans are still waiting for policies that put people and paychecks first. What happens at the Fed matters, but real change needs to show up at kitchen tables across middle America.