Fed cuts rates: How much did US credit costs fall?

The US Federal Reserve has lowered interest rates by 50 basis points, setting a new range of 4.75–5.00%. This decision, made on September 17, 2025, marked a turning point in FOMC policy and means that for the average American borrower with a $400,000 mortgage, the monthly payment will decrease by approximately $130–$150. This move, anticipated for months, definitively closed the period of the most restrictive central bank actions in the last decade.

The September 2025 meeting of the Federal Open Market Committee (FOMC) was more than just a technical adjustment to the cost of money. It was a moment when Jerome Powell had to reconcile hard macroeconomic data with market expectations and growing political pressure. The 50-basis-point cut was not merely a correction – it was a signal sent to the economy that the risk of recession had outweighed the determination to curb inflation. Analysts, who had been arguing for months about the scale of the cut, received an answer more aggressive than the baseline scenario of many financial institutions.

For American consumers, feeling the burden of high interest rates when taking out consumer or auto loans, September 17 became a turning point. High debt-servicing costs, which had effectively cooled demand throughout 2024 and the first half of 2025, began to slowly subside. However, in the world of finance, nothing happens in a vacuum. A rate cut is, on one hand, a relief for debtors, but on the other, a warning signal for the labor market. Investors began to ask themselves: does the Fed know something about the state of the economy that we do not yet see?

The political background of the Fed's actions in 2025 was exceptionally clear. Donald Trump, not hiding his expectations, repeatedly suggested throughout the summer months of 2025 that the central bank must react to the deteriorating sentiment in the industrial sector. Business Insider Polska had already pointed out in July the growing impasse in which Jerome Powell found himself. The institution's independence was put to the test, and every FOMC decision was analyzed in terms of whether the Fed was truly data-driven or if it had succumbed to campaign rhetoric.

It is hard to shake the impression that the September cut was an attempt to get ahead of the curve. The central bank had to regain the initiative. If monetary policy had indeed become a tool in the hands of politicians, trust in the USD as a safe haven could have been shaken. Powell, maintaining his image as a technocrat, had to balance the requirements of economics with pressures that had become exceptionally loud in 2025. This was no ordinary meeting. It was a game of credibility, with billions of dollars invested in US bonds at stake.

The financial market before the September resolution resembled a taut string. Investors, accustomed to hawkish rhetoric, were not prepared for such a clear signal of easing. The memory of September 2024, when the debate around interest rates in the US was still in its infancy and inflation seemed like a problem impossible to control quickly, was still in the minds of analysts. Back then, a year ago, no one dared to forecast such radical moves.

The situation changed drastically in 2025. Strefa Inwestorów had warned earlier that the September decision could bring market disappointment if the Fed did not meet high expectations. When the 50-basis-point cut was announced on September 17, 2025, the reaction was immediate. Stock indices reacted with volatility not seen in months. Capital began to flow rapidly from safe assets toward equities, a classic move in the face of cheaper money.

However, looking at it from the perspective of January 2026, it is clear that the euphoria was premature. Money.pl reported at the time a state of "bated breath." After the initial shock, the market began to demand stabilization. Companies that had planned investments based on cheaper credit began to withdraw from long-term commitments, fearing that the September decision was merely a one-off gesture rather than the beginning of a long downward path.

Comparing this to the Polish scene, one can see a chasm in the philosophy of money management. The Monetary Policy Council (RPP) in Warsaw in 2024 opted for absolute inertia. The monthly financial magazine BANK noted at the time that the RPP had no intention of changing course, keeping rates at an unchanged level. It was a conservative, almost ascetic approach. While the Fed in the US had to react to dynamic changes in the economy, the RPP preferred to wait out the storm.

The situation changed in October 2025, when the Polish council surprised everyone by cutting rates at a time when economists expected the status quo to be maintained. It was a move that embarrassed even the most seasoned market players. Was it a delayed action? Many signs point to yes. Polish entrepreneurs, looking at the Fed's decisions, had hoped for similar determination in Warsaw much earlier. Instead, they received a decision that for many was a surprise, and for some, a signal that Polish monetary policy had become unpredictable.

The divergence between the actions of the Fed and the RPP in 2024–2025 shows fundamental differences in the foundations of both economies. The US, as the center of the global financial system, could not afford to stifle the economy with high rates for too long. Poland, dependent on capital flows and sentiment in the Eurozone, had to weigh currency risk. For a borrower in Poland, September 2025 in the US was merely a curiosity, while the October RPP decision directly translated into the amount of mortgage payments in PLN.

The US stock market after September 17, 2025, had to learn to live in a new reality. Investors, who for months had analyzed every shadow on Jerome Powell's face during press conferences, finally received hard proof that the "higher for longer" era was coming to an end. This did not, however, mean uncritical optimism. Trading floors remained vigilant. Capital liquidity on American stock exchanges after the decision was announced became extremely sensitive to any mention of labor market data.

This was particularly visible in the fourth quarter of 2025. Every employment report was analyzed with a magnifying glass. If the data turned out to be weaker than forecasts, the market immediately priced in further rate cuts. If the data were strong, investors feared that the Fed would hold off on further moves. It was a cat-and-mouse game in which the central bank tried to keep the economy in a "soft landing."

An analysis from August 2026 indicates that September 2025 was the moment when the market had to brutally reconcile expectations with hard macroeconomic data. Investors, accustomed to a long period of waiting, struggled to interpret this move as the beginning of a longer easing cycle. Even after the decision was announced, trading floors remained vigilant, not automatically assuming a return to the era of cheap money. For many stock market players, it was a lesson that the central bank operates to the rhythm of its own indicators, not to the dictates of current sentiment on Wall Street.

Prospects for 2026 became the main point of reference for all investment strategists. Looking back at January 2026, we remember the atmosphere of anticipation. The market at that time expected stabilization, hoping for a slowdown in the volatility that had plagued investors throughout the previous year. Investors, tired of the mood swings, held their breath in the hope of predictability. Reality, however, quickly verified these expectations, forcing capital managers to revise their portfolios.

Current interest rate levels, remaining in the 4.75–5.00% range, have become the foundation upon which the investment strategy for the second half of 2026 is built. Companies and funds have stopped speculating about sudden moves and have focused on adapting to the cost of money, which has ceased to be a shock and has become the new operational norm.

For the capital market, this is an ambiguous situation. On one hand, the stabilization of credit costs provides space for planning long-term investments. On the other, the lack of further, rapid cuts that optimists were counting on forces a revision of expectations regarding corporate profits in the fourth quarter. The game is no longer about whether the Fed will change course, but about how long the economy will withstand this level of burden without a clear slowdown. Investors who bet on rapid cuts in January had to come to terms with the fact that FOMC policy had become more defensive than predicted. Now, patience and resilience to financing costs, which remain significantly higher than in the days of cheap money, are what count.

It is worth noting what this means for the average market participant. A Fed rate cut is certainly a relief for borrowers in the US, but it is primarily a signal to investors that the fight against inflation has entered a new phase. Bondholders gain, as their valuations rise along with falling yields, while those holding cash in low-interest deposits, which offer lower and lower returns month by month, lose out. The catch lies in the pace of further cuts – if the economy slows down too much, the Fed will have to act more aggressively, which will trigger another wave of volatility in stock markets.

All these events add up to a picture of a central bank that is on the defensive. Jerome Powell, with decades of experience behind him, knows perfectly well that a mistake in monetary policy can cost millions of jobs. That is why the September 2025 decision was communicated so cautiously. Every word spoken at the press conference after the meeting was weighed on a golden scale.

In retrospect, it is clear that 2025 was a year of breaking through. Breaking through the resistance to cuts, breaking through the political isolation of the central bank, and finally – breaking through the narrative about the necessity of keeping rates above 5 percent. Today, as we analyze data from 2026, we see that the US economy showed more resilience than pessimistic scenarios assumed. Companies survived the period of high costs, and consumers learned to manage their budgets in the new reality.

However, one cannot forget that the long-term effects of the September decision remain undiscovered. Was 50 basis points enough to prevent a recession? Or was it just a temporary injection of energy that will expire before the end of 2026? We will look for answers to these questions in subsequent FOMC communications. One thing is certain: the times when interest rate decisions were a boring, predictable element of the economic calendar are a thing of the past. Today, every such decision is an event that can shake global stock markets.

For an observer from Poland, the situation in the US is a lesson in humility. It shows how distant the paths of economic development are. We, in Poland, have to deal with our own problems, such as core inflation or wage dynamics, which rarely coincide with the American business cycle. Nevertheless, decisions made in Washington will always cast a shadow on our financial markets. Understanding the mechanisms that guided the Fed in 2025 is crucial for anyone who wants to consciously manage their finances in the coming years.

In summary, the Fed's September decision was the moment when monetary policy ceased to be just academic theory and became a real tool for crisis management. Was it an effective action? Time will tell. For now, we can only state that it was a bold action that forever changed the financial landscape of 2025. Investors who were able to read between the lines of FOMC communications certainly drew the right conclusions from this period. The rest had to learn from their own mistakes during the volatile months of 2026.

Uncertainty remains the only constant in the world of finance. Anyone planning their investments for the coming quarters should keep in mind that the Fed has not yet said its last word. If inflation starts to rise again and the labor market proves to be excessively overheated, Powell will have to reach into his arsenal of tools again. Will the market react the same way this time? It is doubtful. After September 2025, investors are much more cautious in their forecasts and much more sensitive to every signal coming from Washington.

It is worth remembering that every central bank decision is a compromise. A compromise between economic growth and price stability, between the interests of debtors and the interests of creditors. The September 2025 cut was the best example of this. It was a decision that satisfied debtors but worried those who still fear inflation. However, such is the cost of managing one of the world's largest economies in times of great uncertainty.

For the reader, the most important conclusion is: monetary policy has a direct impact on what happens in their wallet. Regardless of whether we are talking about the US or Poland, every change in interest rates is a real change in the cost of living and investment opportunities. Following these actions is no longer just a privilege of economists, but a necessity for anyone who wants to maintain financial security in a changing world.

Questions and answers:

By exactly how much did interest rates in the US fall?

The Federal Reserve lowered rates by 50 basis points, setting the range at 4.75–5.00%.

When was the key decision to cut rates made?

The FOMC decision was announced on September 17, 2025.

Did the RPP also lower rates at the same time?

The RPP made an unexpected rate cut in October 2025, while in 2024 it kept them at a stable level, which created a clear divergence in the monetary policy of both countries.

What were the main causes of pressure on the Fed before September 2025?

The main cause was the fear of an economic slowdown and clear political expectations, including public statements by Donald Trump suggesting the need to stimulate the economy through cheaper money.

How did the market react to the Fed's September 2025 decision?

The market reacted with initial volatility, followed by cool calculation, weighing the benefits of cheaper financing against the risk of recession, which led to a cautious approach by investors in the following months.

Sources

Article prepared by the Wiadomości PRO editorial team with the support of artificial intelligence. Facts are derived from the sources provided above.