When the Federal Reserve (the Fed) announced yet another interest‑rate cut, it was framed as a move to bolster growth and support workers. But scratch the surface and you’ll find a more complicated picture: one in which cheap money flows quickly toward banks and investors, while signals flash that the real economy may be losing momentum—and ordinary workers could be left behind.
What happened
On October 29, 2025, the Fed lowered its target for the federal funds rate by a quarter of a percentage point (to a range of 3.75 %–4.00 %) — its second cut of the year. (Bankrate) The decision was not unanimous: two members of the Federal Open Market Committee (FOMC) dissented, one calling for a larger cut, the other for none at all.
The statement accompanying the decision was frank: job gains “have slowed … and the unemployment rate has edged up but remained low,” while inflation “remains somewhat elevated.” The Fed made clear that its decision reflected rising downside risks to employment—not just inflation—and flagged that additional cuts are not guaranteed.
Why banks tend to win from this
Lowering short‑term interest rates is like opening a tap of cheap credit. For banks and large financial institutions:
- Their cost of funds falls. When the Fed reduces its benchmark rate, it lowers the cost at which banks borrow (or can expect to borrow) overnight and from each other.
- Their asset portfolios benefit. Many banks hold large amounts of financial assets (loans, securities). When rates go down, valuations can go up, and refinancing becomes more attractive.
- Credit spreads tighten. For institutions that benefit from lending and leveraging, cheaper money enhances margins—so long as borrowers stay solvent and demand holds up.
In short: when policy shifts toward easier money, banks often get an early boost. For workers and small businesses, the benefits are more diffuse and delayed.
Why this is a warning sign for the workers‑economy
We should not interpret the rate cut purely as “supporting workers.” In fact, the move may signal the opposite: that policy sees trouble ahead. A few points:
- The labour market is cooling. The Fed itself acknowledged job gains have slowed and risk to employment has risen. Private‑sector indicators show similar softening: hiring is weaker, layoffs creeping up, and many companies beginning to freeze hiring. For workers, this means fewer opportunities, less negotiating power, and possibly stagnant wages.
- Inflation remains elevated. While inflation has come down from the heights of 2022–23, it still remains above the Fed’s 2 % target. That means lower rates are a gamble: if inflation picks back up, workers who depend on wage growth lose out.
- Real economy vs. financial economy divergence. Cheap credit often propels asset‑markets more than the Main Street economy. When banks get the benefit first, and lending flows into apps, trading desks, bond markets, rather than into new hiring or facility expansions, then the rate cut may widen the gap between capital owners and workers.
- Debt dependence rises. In a system where growth is weak, lowering rates is a tool of last resort: it attempts to stimulate demand via cheaper borrowing rather than via boosting incomes or structural reform. That signals a reliance on credit rather than broad‑based prosperity.
- Uneven flow of benefits. Consumers may see modest relief (slightly lower car‑loan costs, potentially lower mortgage rates), but as one recent analysis noted: many financing costs remain historically high and savings yields are already falling. This means households may not fully share in the gains, even as the financial sector does.
What this means for workers & small businesses
- Workers: With hiring slowing, wage growth weak, and job security more fragile, this is not the moment to expect windfalls. While cheap loans might enable some consumer purchases, that’s unreliable if incomes aren’t growing.
- Small businesses: These firms may benefit from lower borrowing costs—but only if they are willing to borrow, confident of demand, and have healthy cash flows. If demand is weak, cheaper credit alone won’t spark investment. Moreover, they compete with larger firms that often have easier access to credit or capital.
- Policy watchers: The rate cut reflects a shift in focus—from fighting inflation to propping up employment. That shift implies the Fed sees more risk of deflationary pressures than purely inflationary ones. It also raises questions: if demand weakens further, will we see a credit‑fuelled bubble rather than real growth?
- Inequality stakeholders: Lower rates tend to boost asset prices (stocks, real estate), which disproportionately benefit wealthier households. Meanwhile, for working‑class households, the direct benefits are smaller and slower. That dynamic can widen the wealth gap, even as policy claims to support the broader economy.
How this ties into broader critiques of market‑first solutions
At WorkforceWise, we question narratives that rely on markets alone to deliver shared prosperity. This rate cut presents a case in point: the policy tool is deployed not because workers are thriving, but because the economy is showing signs of weakness. And those signs suggest that the free‑market engine alone is sputtering.
The move signals that the system is still built around credit, debt, and financial engineering rather than sustained wage growth, broad investment, or productivity gains. If monetary policy becomes the primary lever to keep things afloat, that raises structural risks: will we end up relying on asset‑inflation and debt rather than real income growth? Will workers keep getting squeezed even as financial firms get rewarded?
What to watch next
- Order vs timing of further cuts: The Fed’s statement flagged that further cuts are not a given. Markets had been expecting more easing, but the Fed pushed back.
- Labour‑market data: As more jobs reports and wage‑growth data come in, we’ll see whether the slowdown is broad‑based or holds in certain sectors only.
- Credit flows: Are banks and lenders increasing loans to firms and consumers, or are they tightening standards in the face of risk? Bigger banks may get the benefit, but if they hold back, workers won’t see the downstream effects.
- Asset‑price inflation vs real‑economy growth: If stocks and real estate continue to climb while incomes and employment stagnate, the divide between capital and labor will grow. That’s a systemic risk.
- Policy shifts beyond the Fed: If monetary policy is doing the heavy lifting, will fiscal/industrial policy step up to support sectors, train workers, boost productivity? Or will we stay stuck in a credit‑led model?
The Fed’s rate cut may be publicly framed as helping the economy and workers—but in reality, it’s easy money for banks, paired with a warning sign about the state of the broader economy. For workers and small businesses, the headline numbers might look benign, but the underlying signals suggest caution.
As we at WorkforceWise see it, policy discussions must go beyond “lower rates = better economy.” We have to ask: who really benefits? What structural inequalities are being deepened? And what happens if the credit curve runs out of traction?
In the end, lowering rates may be necessary given weak momentum—but it is not a panacea for a system where wages, opportunity and shared prosperity have for too long been sidelined. For workers, this is a moment to watch carefully—not just the borrowing costs—but the trajectory of their jobs, incomes and the chances of meaningful, broad‑based growth.
