US Fed delivers third rate cut of the year

Friday, 12 December 2025 00:00 - - {{hitsCtrl.values.hits}}

The US Federal Reserve lowered its benchmark federal funds rate by 25 basis points on Wednesday to a range of 3.5%–3.75%, marking the third cut this year. The decision was approved on a 9–3 vote, with Governor Stephen Miran calling for a 50-basis point reduction and Kansas City Fed President Jeffrey Schmid and Chicago Fed President Austan Goolsbee preferring no change.

The policy statement repeated earlier guidance that future adjustments will depend on incoming data, the economic outlook and the balance of risks. Similar wording in December 2024 preceded a pause in rate cuts until September 2025.

Fed Chair Jerome Powell said the current rate level allows the committee to observe how the economy develops. He said no decision has been made on the January meeting. US equity markets rose after the announcement and Treasury yields moved lower.

The Fed’s updated projections indicated one rate cut in 2026 and one in 2027, with the policy rate expected to settle around 3% in the longer run. The projections showed divisions within the committee, with seven officials indicating no cuts next year and several nonvoting participants noting reservations about the decision.

The committee raised its forecast for 2026 US GDP growth to 2.3% and continues to see inflation remaining above the 2% target until 2028. The Fed’s preferred inflation measure was 2.8% in September.

Powell has three meetings remaining before the end of his term. President Donald Trump is expected to nominate a successor, with market-based prediction platforms placing National Economic Council Director Kevin Hassett as the current frontrunner.