- The U.S. Federal Reserve cut interest rates by 0.25 percentage points, its third consecutive reduction, bringing the key rate to around 3.5–3.75%, the lowest in nearly three years.
- The committee is sharply divided after three officials dissented, the most in six years. Two wanted no cut, while one pushed for a larger 0.5-point cut.
- The Fed signaled a likely pause in further cuts. Policymakers expect only one rate reduction next year, with wide internal disagreement on policy for 2026 and beyond.
- Fed Chair Jerome Powell said the policy rate is now near a “neutral” level that neither stimulates nor restrains growth, making additional cuts harder to justify unless the labor market weakens considerably.
- The central bank highlighted a softening labor market, citing slowing job gains, rising unemployment to 4.4%, and risk of downward revisions to employment data following a recent 43-day government shutdown.
- Inflation remains above the 2% target at 2.8%, and may rise temporarily as tariff-related costs pass through to consumers. Policymakers expect inflation to ease to about 2.4% next year.
US Federal Reserve Cuts Interest Rates by 0.25%, Signals One Cut Next Year
