U.S. Banks Cut Prime Rate to 7.25% After Fed Move as Trump’s Tariffs Cast a Shadow on Growth

Wall Street just witnessed another pivotal moment. Major U.S. banks – JPMorgan Chase, Citigroup, Wells Fargo, and Bank of America – slashed their prime lending rate from 7.50% to 7.25% immediately after the Federal Reserve announced a 25-basis-point cut on Wednesday. The shift comes as the U.S. economy grapples with rising unemployment and a fragile labor market, while inflation remains above target.

Fed Under Pressure from a Weakening Job Market At its September meeting, the Federal Reserve lowered interest rates by 25 bps – the first adjustment since last December. Officially, the move was a preemptive response to surging jobless claims and slowing hiring, rather than a reaction to inflation. Richard Flynn of Charles Schwab UK explained: “The labor market is showing more signs of weakness than expected. Companies are hesitant to hire, and job growth has nearly stalled.” The cut is expected to ease borrowing costs across mortgages, small business loans, credit cards, and personal lending.

Dimon and Solomon Warn of Tariff and Fiscal Policy Risks JPMorgan CEO Jamie Dimon remains skeptical. He warned that tariffs, immigration policy, and Donald Trump’s fiscal strategies are stifling growth and creating uncertainty. Goldman Sachs CEO David Solomon echoed the concern in a CNBC interview: “There’s no question tariffs are impacting growth. And that’s only part of the picture.”

A Divided Fed, Tepid Market Reaction Inside the Fed, the decision wasn’t fully unanimous. Newly appointed board member Stephen Miran pushed for a half-point cut, but most supported the smaller quarter-point adjustment. Markets, however, barely moved. Investors had hoped the Fed would bow to Trump’s pressure for a full percentage-point cut. Instead, policymakers opted for caution. Fed Chair Jerome Powell called the move “risk management,” signaling that while the economy isn’t collapsing, the central bank is trying to get ahead of potential trouble.

What It Means for Americans Cheaper credit could provide short-term relief for small businesses and households. If confidence returns, firms may start hiring again and consumers may resume spending. Whether this rate cut is enough to reignite growth, however, remains an open question.

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