Fed Slashes Policy Rate for Second Time in 2025
(MENAFN) The U.S. Federal Reserve on Wednesday lowered its benchmark federal funds rate by 25 basis points, bringing the target range to 3.75% - 4%, in line with market expectations.
This marks the second rate cut of 2025, following a period of five consecutive meetings in which the central bank kept rates unchanged before implementing its September reduction.
The Fed cited data indicating that economic activity continues to grow at a moderate pace.
"Job gains have slowed this year, and the unemployment rate has edged up but remained low through August; more recent indicators are consistent with these developments," the central bank said.
The central bank also noted that inflation has risen since earlier this year and remains "somewhat" elevated.
The Federal Open Market Committee (FOMC), which determines interest rates, aims to achieve maximum employment while maintaining inflation around 2% over the long term.
"The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months," it emphasized.
Looking ahead, the Fed said the FOMC will "carefully" consider incoming data, the evolving economic outlook, and the balance of risks when deciding on the timing and scale of future rate adjustments.
"The Committee decided to conclude the reduction of its aggregate securities holdings on December 1," the announcement added.
The decision to cut rates by 25 basis points was backed by 10 of the 12 governors. Stephen Miran supported a larger 50-basis-point reduction, while Jeffrey Schmid voted to maintain rates.
The move follows weaker-than-expected employment data in recent months, before a government shutdown temporarily halted new economic releases. Maximum employment and stable prices remain the dual mandate guiding the Fed’s monetary policy.
U.S. non-farm payrolls rose by just 22,000 in August, falling short of expectations, while the unemployment rate ticked up to 4.3%. Private sector jobs declined by 32,000 in September, contrary to forecasts for growth.
Additionally, the Bureau of Labor Statistics revised its employment data in September, revealing that 911,000 fewer non-farm jobs were added in the 12 months ending March 2025 than initially reported.
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