After months of widespread economic uncertainty, the Federal Reserve announced Wednesday it will cut interest rates by a quarter percentage point, lowering the benchmark interest rate to a range of 4% to 4.25%.

The Federal Open Market Committee, the Fed’s policymaking arm, expects to execute two additional cuts before year’s end, according to the central bank’s summary of projections. Only one additional cut is projected for 2026.

Balancing Inflation vs. Job Growth

The highly anticipated rate cuts come after indicators suggest slowing job gains, an increase in unemployment and rising inflation rates. The Fed must now tackle dual but equally important economic priorities: curbing rising inflation and supporting job growth, which has dwindled in recent months.

The U.S. economy added 22,000 jobs in August, a figure far below economists’ initial expectations of 75,000. And in 2025, layoffs surged to over 800,000 as of August, a 75% increase compared to the same data this time last year.

Meanwhile, the Consumer Price Index – the most common economic measuring tool for inflation calculated by the U.S. Bureau of Labor Statistics – has been trending steadily upward, from 2.3% in April to 2.9% in August. It’s a pattern that can likely be explained by Trump’s “reciprocal tariffs,” which went into effect last month. It now exceeds the Fed’s target rate by 0.9 percentage points.

Typically, the Fed hikes up interest rates to drive inflation down, but an unsteady labor market makes this a particularly delicate balance to strike.

“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run,” the Fed said in a statement released yesterday afternoon. “Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment have risen.”

Still, the Fed remains optimistic that its decision to cut rates by less than 50 basis points was the right one.

“We’ve done very large rate hikes and very large rate cuts in the last five years, and you tend to do those at a time when you feel that policy is out of place and needs to move quickly to a new place,” Fed Chair Jerome Powell said at a press conference yesterday. “That’s not at all what I feel … now. I feel like our policy has been doing the right thing so far this year.”

2028

The year the Federal Reserve expects inflation to return to its 2% target rate.

Potential Impact on Promo

These rate cuts are likely to encourage promo industry insiders, who have historically linked lower interest rates with stronger corporate hiring and increased client spending.

A Fed rate cut will create higher demand for promotional products and other marketing spend, as it “signifies more confidence in the overall economy,” Andy Shape, a Counselor Power 50 member and CEO of Counselor Top 40 distributor Stran & Company (asi/337725) told ASI Media last year. “This increased confidence should expedite the decision-making process amongst promotional products buyers, who will be less hesitant about economic conditions and more inclined to move forward with large purchases.”

Powell added that a quarter-point cut is unlikely to make a huge difference in the economy in the short term, but planned Fed rate cuts for later this year and 2026 should pave the way for greater economic balance moving forward. The Fed says the economy is unlikely to return to its target inflation rate of 2% until 2028.