Federal Reserve Cuts Interest Rates By 25 Basis Points

"The Federal Reserve said they made the cuts to support maximum employment and return inflation to 2%. Economic activity is expanding moderately, job gains have slowed, and inflation remains somewhat elevated, the Fed said. Most officials voted for the cut, with three dissenting-one preferring a larger cut and two preferring no change. Policymakers said the decision reflects easing inflation pressures and a desire to support economic activity as growth moderates. The Fed had kept rates unchanged for several meetings after its October cut."

"Fed officials also left their rate forecasts unchanged, signaling modest 25-basis-point cuts in 2026 and 2027, with expected 2026 unemployment at 4.4%, PCE inflation at 2.4% and GDP growth at 2.3%. The 10-year Treasury yield has climbed this month even as expectations for a rate cut grew, signaling investor concern that easing policy now could reignite inflation and force rates higher later."

"The Fed's internal divisions add to that tension, as Jerome Powell heads up what is probably his final meeting as chair before President Trump names a successor, ending a tenure defined by consensus-building amid unusual discord. Lower interest rates reduce borrowing costs for households and businesses. They can encourage spending, investment, and risk-taking across financial markets. Before these cuts, some said that inflation was easing, but regardless, the market widely expected a 25 basis-point rate cut."

The Federal Reserve lowered the federal funds target range by 25 basis points to 3.50%-3.75%, marking the third cut of the year and first since October. Policymakers cited easing inflation pressures, moderately expanding economic activity, and slower job gains as reasons to support employment and guide inflation toward 2%. Most officials supported the cut while three dissented. Officials left longer-run rate forecasts unchanged, signaling modest cuts in 2026 and 2027, and projecting 2026 unemployment at 4.4%, PCE inflation at 2.4%, and GDP growth at 2.3%. The 10-year Treasury yield rose amid investor inflation concerns.

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