03:06 PM EDT, 09/17/2025 (MT Newswires) -- (Updates with the Summary of Economic Projections and comments from Oxford Economics.)

The Federal Reserve reduced its benchmark lending rate by 25 basis points Wednesday, noting increased downside risks to employment and signaling further policy easing later in 2025.

The central bank's Federal Open Market Committee lowered interest rates to a range of 4% to 4.25%, in line with Wall Street's expectations. Its previous rate cut came in December. Newly appointed Fed Governor Stephen Miran preferred a 50-basis-point reduction at the Wednesday meeting, and was the sole dissenter, according to the FOMC.

"Recent indicators suggest that growth of economic activity moderated in the first half of the year," the FOMC said Wednesday following its two-day meeting. "Job gains have slowed, and the unemployment rate has edged up, but remains low."

Official data released earlier this month showed that US nonfarm payrolls rose by 22,000 in August, well below the 75,000 increase that the Street had expected. The unemployment rate rose to 4.3% from 4.2%. For the year through March, the Bureau of Labor Statistics revised down nonfarm payrolls growth by 911,000.

Prior to the FOMC's latest policy easing, US President Donald Trump had repeatedly criticized Fed Chair Jerome Powell and urged the FOMC to lower interest rates.

The committee said Wednesday that inflation has "moved up and remains somewhat elevated."

Government data recently showed that US consumer inflation accelerated at the fastest pace in seven months in August, while the annual core rate remained above 3%.

"In considering additional adjustments to the target range for the federal funds rate, the committee will carefully assess incoming data, the evolving outlook, and the balance of risks," the FOMC said Wednesday.

The committee's Summary of Economic Projections showed Wednesday that policymakers now see the median federal funds rate at 3.6% at the end of this year, down from 3.9% estimated in June. They lowered their rate outlook to 3.4% from 3.6% for 2026 and to 3.1% from 3.4% for 2027.

Policymakers continue to see the unemployment rate at 4.5% this year, but reduced expectations to 4.4% from 4.5% for next year and to 4.3% from 4.4% for 2027. They raised their annual economic growth projections through 2027 and held their inflation outlook steady for this year.

"We believe the Fed's near-term economic projections remain overly pessimistic, leading us to anticipate a slower pace of easing in upcoming meetings," Oxford Economics Deputy Chief US Economist Michael Pearce said in remarks e-mailed to MT Newswires.

"Our forecast is for the next (25-basis-point) cut to come in December," Pearce wrote. "However, given the deep divide on the committee, the Fed will be sensitive to any additional negative surprises in the incoming labor market data."

The FOMC's next meeting is scheduled for Oct. 28-29.