The US Federal Reserve delivered a widely expected 25 basis point rate cut on Wednesday, narrowing the range on its benchmark interest rate by 25 basis points to 3.50% to 3.75%. This marks the third consecutive quarterly point reduction and brings short-term borrowing costs to the lowest level since 2022.
“Uncertainty about the economic outlook remains high,” the Fed said in its policy statement. “The Committee is aware of the risks to both sides of its dual mandate and assesses that downside risks to employment increased in recent months.”
The Fed also noted in its statement that reserve balances had fallen and said it intends to begin buying shorter-term Treasuries as needed to “maintain an ample supply of reserves.”
The price of bitcoin was volatile in the minutes following the news but remained around the $92,400 level. US stocks rose modestly and the 10-year Treasury yield fell two basis points to 4.15%
Today’s rate cut is particularly notable given the unusually wide public disagreement among Fed members over the course of monetary policy. Several in recent weeks had previously expressed their opposition to not only today’s easing, but also the central bank’s reduction of 25 basis points at its previous meeting in October.
In fact, two members — the Kansas City Fed’s Jeffrey Schmid and the Chicago Fed’s Austan Goolsbee — voted to keep the policy steady. A third member, Fed Governor Stephen Miran — a recent Trump appointee — voted for a 50 basis point cut.
Updating financial projections
Alongside the policy decision, this Fed meeting came with an updated set of the central bank’s economic projections.
Core inflation is now seen at 3% for 2025 and 2.5% for 2026, each down 10 basis points from previous estimates. GDP growth is forecast to be 1.7% this year and 2.3% in 2026, up from previously estimated 1.6% and 1.8% respectively.
The so-called “dot plot” is little changed, with policymakers still seeing only one rate cut in 2026, even though markets have priced in two rate cuts next year.
Today’s news comes at a time when policymakers are still operating without several key economic data releases that remain delayed or suspended due to the US government shutdown. Also at stake is President Trump’s continued bashing of current Fed Chairman Jerome Powell alongside his search for a replacement when Powell’s term as chairman ends next year.
Attention now turns to Powell’s press conference after the meeting at 2:30 p.m. ET, where listeners will try to discern his and the Fed’s thoughts on the future path of monetary policy. Ahead of Powell’s appearance, traders have priced in a 24% chance of another rate cut in January, according to CME FedWatch.
