Economy|BanksUS Federal Reserve cuts interest rates in final decision of the yearThe central bank cut rates for the third time in 2025 as limited government data clouds economic outlook.
The United States Federal Reserve has reduced interest rates by 25 basis points, setting the benchmark rate to 3.50-3.75 percent. This marks the last rate adjustment for the current year. The decision follows a slowdown in job growth in the US, as…
The United States Federal Reserve has reduced interest rates by 25 basis points, setting the benchmark rate to 3.50-3.75 percent. This marks the last rate adjustment for the current year. The decision follows a slowdown in job growth in the US, as indicated by recent economic data.
The Federal Reserve's decision was anticipated, with a probability of 89 percent according to the CME FedWatch tool. This move came amidst gaps in government data due to a prolonged 43-day government shutdown, affecting key economic indicators such as import and export prices, the producer price index report, and state employment and unemployment statistics.
In September, the last full month of available data, the unemployment rate increased slightly to 4.4 percent, while core inflation rose to 2.8 percent. Recent reports indicated a 0.8 percent rise in US labor costs in the third quarter, which was slightly below expectations. The labor market continues to show signs of cooling, as noted by Fed Chair Jerome Powell during a news conference.
The Federal Reserve may adopt a more cautious approach to interest rate adjustments next year due to the cooling labor market and persistent inflation. Economic analysts have highlighted the potential for a "jobless expansion," where GDP growth occurs without significant employment gains, rendering the economy more susceptible to shocks.
The United States Federal Reserve has reduced interest rates by 25 basis points, setting the benchmark rate to 3.50-3.75 percent.
Despite the Federal Reserve's efforts to remain independent, there has been pressure from political figures, including US President Donald Trump, for further rate cuts. The recent appointment of Stephen Miran to the Fed board, who has advocated for more significant rate reductions, reflects this political influence. In the latest decision, Miran voted for a more aggressive half-percentage-point cut, while other governors, including Austan D Goolsbee and Jeffrey R Schmid, had differing views.
Daniel Hornung, a policy fellow at Stanford Institute for Economic Policy Research, noted the complexities in the Fed's landscape due to elevated inflation and incomplete economic data. These factors, combined with political pressures, add challenges to the Federal Reserve's objectives.
Fed Chair Jerome Powell's term concludes in mid-May 2026. President Trump has indicated that support for immediate rate cuts will be a criterion for his choice of the next Federal Reserve leader. Additionally, an impending Supreme Court decision regarding the potential dismissal of Fed Governor Lisa Cook, accused of mortgage fraud, adds further uncertainty to the Federal Reserve's future dynamics.
Based on reporting by Al Jazeera.