U.S. Federal Reserve lowers prime lending rate, citing sluggishness in the job market
The European Union's common currency, the euro, has seen a significant rise against the US dollar in recent days. Before the much-anticipated interest rate decision, the euro had climbed to approximately 1.18 US dollars.
This appreciation can be attributed to the Federal Reserve's decision to lower mortgage rates, making the US dollar less attractive in the global market. The reduction in mortgage rates was collectively determined by the Federal Open Market Committee (FOMC), chaired by Jerome Powell, the Fed chairman, and committee members. On September 17, 2025, the FOMC announced a 0.25 percentage point cut to the target range of 4.00 to 4.25 percent.
The slow employment growth in the United States has also contributed to the euro's appreciation. Recent labor market figures have fallen short of expectations, indicating that the US economy is not growing as fast as anticipated. Employment growth in the twelve months to March 2025 was revised downwards by a total of 911,000 jobs.
This slow employment growth has also caused inflation risks related to US tariffs to take a back seat. With less employment growth, there is less pressure on wages, which can help to keep inflation in check.
However, the lower mortgage rates have a silver lining for the US economy. They make loans cheaper for companies and consumers, potentially stimulating economic activity and creating jobs. More money in circulation due to lower mortgage rates can also help to boost the economy.
This development is likely to benefit European tourists, who will find a cheaper trip to the US as a result of the euro's appreciation. As the exchange rate continues to fluctuate, it will be interesting to see how these economic factors play out in the coming months.
