The Federal Reserve lowered its target range for the federal funds rate to 4.00–4.25 percent, down from 4.25–4.50 percent. This marks its first cut of 2025, citing softer job gains and increasing employment risks.
Inflation remains at 2.9% year-over-year, keeping pressure on construction input costs.
Though long-term uncertainty persists, lowering borrowing costs may ease financing for contractors, developers, and building product manufacturers.
The Federal Reserve cut its benchmark interest rate by a quarter percentage point today, marking its first monetary policy easing of 2025 amid signs of cooling economic growth.
In a press release, the Fed noted that:
Growth of economic activity moderated in the first half of the year.
Job gains have slowed, and the unemployment rate has edged up but remains low.
Inflation has moved up and remains somewhat elevated.
The Federal Open Market Committee (FOMC) voted to set the target range for the federal funds rate at 4 to 4.25 percent, down from 4.25 to 4.5 percent. The move reflects slower job gains, a slight rise in unemployment, and persistent uncertainty about the outlook.
Fed Chair Jerome Powell said the central bank remains committed to its dual mandate of maximum employment and stable inflation, but acknowledged that “downside risks to employment have risen.”
While inflation is off its highs, it remains above the Fed’s 2% target and continues to weigh on industries like construction, where material and financing costs stay elevated.
Until recently, the FOMC had focused primarily on curbing inflation. However, with job growth slowing and unemployment inching higher, the committee shifted its attention toward labor market health.
The rate cut may provide modest relief in borrowing costs for equipment, project financing, and mortgages for contractors, developers, and building product manufacturers. However, higher-than-average inflation continues to pressure input prices.
The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.4% in August on a seasonally adjusted basis, following a 0.2% gain in July, the Bureau of Labor Statistics reported. Over the past 12 months, the all-items index increased 2.9% before seasonal adjustment.
The Fed also confirmed it will continue reducing its Treasury and mortgage-backed securities holdings, which can influence long-term rates tied to commercial construction loans.
The Fed said future policy decisions will depend on incoming data and risks to its economic goals. The next Federal Open Market Committee meeting is scheduled for October 28 to 29, 2025.
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