The US Federal Reserve cut its benchmark federal funds rate by 25 basis points on Wednesday to a target range of 3.5 to 3.75 percent, its third and final rate cut of 2025. The move followed five meetings with no changes before the Fed resumed easing in September.
The Fed said the latest data shows the US economy expanding at a moderate pace, though job gains have slowed and unemployment has edged up. Inflation has risen since earlier in the year and remains “somewhat” elevated.
“What you see is some people feel we should stop here and we’re in the right place and should wait, and some people think we should cut more next year,” US Fed Chairman Jerome Powell said.
The Federal Open Market Committee (FOMC) reiterated its goal of maximum employment and 2 percent inflation, noting that downside risks to the labor market have increased in recent months. It said future rate decisions will depend on incoming data and the balance of risks. The Fed also said reserve balances are now at “ample” levels and that it will buy short-term Treasuries as needed to maintain reserves.
Nine of 12 policymakers supported the rate cut. Stephen Miran voted for a deeper 50-basis-point cut, while Jeffrey Schmid and Austan Goolsbee preferred no change.
The decision comes amid a mixed labor market. Hiring has flattened, layoffs have picked up, and job openings were little changed in October. Nonfarm payrolls rose 119,000 in September after a decline in August.
Inflation indicators have eased: consumer prices rose 3% annually in September, while the Fed’s preferred core PCE index increased 2.8% year-on-year.
The rate cut also followed public criticism from President Donald Trump, who accused Fed Chair Jerome Powell of reacting too slowly to economic risks and urged more aggressive easing. Despite this pressure, the Fed held rates steady for most of the year and only began cutting as labor market weakness became more apparent.
The central bank had kept rates at a 22-year high of 5.5 percent from July 2023 to September 2024 before gradually reducing them to 4.5 percent in December and then to the current level.
US FED PHOTO