Fed Lowers Rates by 25 Basis Points Amid Slowing Growth and Changing Risks

Federal Reserve Rate Cut: The Federal Reserve announced a quarter-point rate cut on December 10, 2025, reducing the federal funds rate to 3.50%–3.75% due to slowing job growth and rising inflation pressures, while emphasizing the importance of achieving maximum employment.

Operational Adjustments: In conjunction with the rate cut, the Fed implemented several operational measures, including lowering the interest rate on reserve balances and initiating purchases of shorter-term Treasury bills to maintain liquidity.

Internal Dissent: The decision to cut rates was met with some internal disagreement, as three members of the Committee voted against it, with differing opinions on the extent of the cut and whether to change rates at all.

Future Outlook: The Fed indicated a readiness to adjust policies further based on incoming data and evolving economic conditions, highlighting concerns over labor market softness and the need to balance inflation control with economic support.