The Federal Reserve Board cut interest rates for the first time in 2025, finally. It’s progress from the Fed that has been slow to respond to changing economic dynamics. Yet, this rate cut will not be enough to thaw a frozen housing market that has kept home sellers and buyers on the sidelines.

Yesterday, Federal Reserve Chairman Jerome Powell announced that the Fed cut the federal funds rate by a quarter point to a 4 to 4‑1/4 percent range. He noted, “You can think of this, in a way, as a risk management cut.”

Powell has been risk-averse, refusing calls, even historically from two of the Fed’s governors, to cut rates earlier this year. His slowness costs Americans each day.

Here are 5 admissions that Jerome Powell made about the current state of the economy:

  1. Tariffs are not driving widespread inflation: He noted that “Higher tariffs have begun to push up prices in some categories of goods,” Powell said, but added, “but their overall effects on economic activity and inflation remain to be seen.” This cuts directly against the narrative blaming rising inflation on the tariffs raising prices across the board.
  2. Consumers have felt little tariff impact: Despite media reports and to the Fed’s surprise, consumers are feeling the tariffs very little. “To the consumer, the passthrough has been pretty small,” Powell said. “It’s been … slower and smaller than we thought.”
  3. Wages are still beating inflation. Inflation is rising, but wages are rising faster. He explained that “wage growth has continued to moderate while still outpacing inflation.”
  4. Current inflation is nowhere near as high as under President Joe Biden. Powell admitted, “Inflation has eased significantly from its highs in mid-2022,” but added that it is “somewhat elevated relative to our 2 percent longer-run goal.” Yes, the 2.9% inflation rate in August is higher than the Fed’s 2% target rate, but it’s far below 9.1% in June 2022. Let’s not forget just how high prices hit during the previous administration.
  5. Business investment is booming… thanks to the conservative tax cut package (The One Big, Beautiful Bill). Powell was right to mention that “business investment in equipment and intangibles has picked up from last year’s pace.” However, he negated the reason business investment picked up. The Republican-passed tax cut included provisions that spur small and large businesses to invest in factories, equipment, and expansion, such as full expensing and the 20 percent deduction for small businesses. That’s a big omission.

In addition, Chairman Powell left our heads scratching about the Fed’s predictions of weak economic growth for the remainder of 2025. In his comments, he forecasted that the economy would only grow 1.6% this year and closer to 1.5% next year. Yet, in the second quarter of this year, the U.S. economy grew by 3.3%. Meanwhile, the Federal Reserve Bank of Atlanta is forecasting above 3% growth for the rest of the year. Why so pessimistic?

The good news is that interest rates are coming down. This makes borrowing costs on consumer debt, such as car loans and credit cards, a bit cheaper. 

At the same time, mortgage rates have fallen to their lowest level in three years. This is important for prospective homebuyers who have been sidelined by higher interest rates. 

What happens next will be important for keeping up the movement in the housing market. As rates come down, home ownership becomes more affordable for both sellers and buyers. It’s important that the Federal Reserve continue to cut interest rates to provide consumers with financial relief.