In a bold move Wednesday, the Federal Reserve announced a quarter-point cut in its benchmark federal funds rate, lowering it to a range of 3.75 % to 4.00 %. This marks the second consecutive meeting in 2025 at which the central bank has eased, signalling concern about the health of the U.S. labour market even as inflation remains above the Fed’s 2 % target.
[Video from The Federal Reserve]
Fed Chair Jerome Powell emphasised caution, telling reporters that “a further reduction in the policy rate at the December meeting is not a foregone conclusion. Far from it.” The decision was not unanimous: two officials dissented, one favouring a larger cut, the other preferring no cut at all.
Adding to the complexity, the ongoing government shutdown has disrupted the release of key economic data, limiting the Fed’s ability to base its decisions on full information. Meanwhile, the Fed also announced it will halt further shrinking of its $6.6 trillion balance sheet in December, marking a shift in its policy toolkit.
Analysts say the move underscores the Fed’s balancing act: providing support for a cooling jobs market while guarding against inflation’s resurgence.
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