Fed rate cut is attempt to prevent recession without sending prices soaring

(The Conversation is an independent and nonprofit source of news, analysis and commentary from academic experts.)

Ryan Herzog, Gonzaga University

(THE CONVERSATION) The Federal Reserve on Sept. 17, 2025, cut its target interest rate as it shifts focus from fighting inflation to supporting the choppy labor market.

As financial markets expected, the Fed lowered rates a quarter point to a range of 4% to 4.25%, its first cut since December 2024.

The Fed’s decision to begin cutting rates comes as evidence mounts that the U.S. labor market is losing momentum. The headline unemployment rate has stayed steady at near record lows, but the underlying trends are more concerning.

At the same time, the fight against inflation is not over yet. While a cooling jobs market could lead to a recession, cutting rates too much could drive inflation higher.

So if you’re the Fed, what do you do?

I’m an economist who tracks labor market data and monetary policy, examining how changes in hiring, wages and unemployment influence the Federal Reserve’s efforts to steer the economy. There’s an incredibly...