The US Federal Reserve slashed interest rates by a quarter of percentage point in its two-day Federal Open Market Committee (FOMC) Meeting.
This is the third cut by the bank this year after holding interest rates steady for nearly a year since December, 2024. The first cut this year was in September, followed by another in October, and the third in its latest meeting, with Federal Reserve Chair, Jerome Powell, hinting at a pause in any future rate cuts.
“In support of its goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 3-1/2 to 3-3/4 per cent,” said the FOMC in its official statement on Wednesday.
While the third cut was expected, the decision came after at least three governors dissented, showing a hard decision-making for Fed in a conflicting economic situation.
Also Read: Federal Reserve cuts rates by a quarter point
Recent data from the US Bureau of Labor Statistics explains the Fed’s concern. The unemployment rate rose to 4.4 per cent in September 2025, even as the economy added 119,000 jobs, a gain tempered by the federal government shutdown that weighed on hiring during the period.
The weakening trend has added pressure on policymakers to ensure the ongoing softening does not spill into deeper economic distress.
Policymakers are now trying to strike the right balance between the Fed’s dual mandate: stabilising prices while safeguarding the labour market. The committee has showed that, despite the October rate cut and Wednesday’s follow-up, it is not on autopilot. Instead, it will continue to evaluate incoming economic data to chart the future path of interest rates.
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