The Federal Reserve lowered its key interest rate by 0.25 percentage points, reflecting concerns over a rapid slowdown in the U.S. labor market. The new rate range is 3.75%–4%, down from the previous 4%–4.25%.
This marks the second consecutive rate cut, following a similar move in September, and is the first instance of the Fed resuming monetary easing since December 2024.
At a press conference, Fed Chair Jerome Powell emphasized that a further cut at the next meeting on December 10 “is not predetermined.” He noted that Fed members had divergent views on how to address labor market developments, stressing that the next decision will not be automatic. Powell stated:“There were differing perspectives regarding the December meeting. No decision has been made yet, and it would be incorrect to view another cut as an automatic path.”
Fed Cuts Interest Rates Amid Slowing Jobs and Economic Uncertainty
The rate cut aims to stimulate the economy by lowering borrowing costs for individuals and businesses, supporting consumption and investment. The decision comes amid early signs of weakness in the labor market, with the official September jobs report delayed due to the federal government shutdown.
An ADP report showed a decline of 32,000 jobs in the private sector for September, heightening concerns of a noticeable labor slowdown. The Federal Open Market Committee (FOMC) noted that downside risks to employment have increased in recent months, signaling a shift in Fed priorities toward protecting jobs while continuing to monitor inflation containment.
Inflation has fallen from its June 2022 peak of 9.1% to about 3% in September, but remains above the Fed’s 2% target. Over the past two years, the Fed raised rates aggressively to curb prices, which slowed both consumer and business spending.
Fed Faces Split Decision Amid Economic Uncertainty
Today’s decision saw a narrow split: 10 of 12 members voted for the cut, while two dissented—one advocating a larger 0.50% cut, and the other preferring no change.
Uncertainty persists due to the government shutdown, which limits the availability of official economic data and complicates the Fed’s ability to assess conditions accurately. Additionally, the impact of new tariffs has begun to influence consumer prices, albeit less than initially anticipated.
The Fed appears to be attempting a delicate balance: supporting the labor market and avoiding recession while maintaining efforts to contain inflation. Attention now turns to the December meeting, which could reveal whether monetary easing will continue or be temporarily paused until conditions are clearer.