Federal Reserve Cuts Benchmark Interest Rate for Third Straight Time
Following a two-day meeting, the Federal Reserve lowered its benchmark interest rate by 0.25 percentage points yesterday, setting the federal funds rate at 3.5% to 3.75%. This marks the third cut since September, totaling a 0.75-point reduction in 2025. The decision comes as the Fed reviews limited economic data after the recent government shutdown along with signs of slowing job growth. Data from payroll firm ADP showed private employers cut 32,000 jobs in November.
Fed Chair Jerome Powell said the central bank is “well positioned to wait to see how the economy evolves” before making further adjustments, noting that upcoming inflation and employment data will guide the January meeting. New Fed projections indicate that inflation, measured by personal consumption expenditures (PCE), is expected to slow to 2.4% in 2026, with unemployment remaining at 4.4% and economic growth rising to 2.3%.
In fact, the Fed’s rate-setting committee signaled that it may keep its rate unchanged in the coming months. Additionally, in a set of quarterly economic projections, Fed officials signaled they expect to lower rates just once next year.
The current benchmark interest rate is the lowest since November 2022, when the Fed was raising rates to address high inflation. Lower rates reduce borrowing costs for businesses and consumers, which can support economic activity.