The US Federal Reserve has cut interest rates by 25 bps, the third such cut the Fed has executed this calendar year. The new benchmark lending rate between 3.50% and 3.75% is the lowest in years.
“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run,” the US Central Bank said in a statement. “Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months.?
Unlike October’s rate cut decision, this time around, more government data, including jobs data, is available. Job openings increased by 12,000 to 7.670 million in October. However, hiring decreased by 218,000 to 5.149 million. The latest inflation data won’t be released until January, after Trump decided to push the release of data for the first time in 12 years. This sparked concern amongst Fed members and economic experts, worried that a Fed rate cut would.
The Dow Jones index roared up by 230 points following the Fed’s interest rate cut. Meanwhile, the S&P 500 and Russell indexes are also higher. Along with its final policy decision of the year, the Fed also published its final Summary of Economic Projections (SEP) for 2025, which includes forecasts from Fed officials on economic growth, inflation, and interest rates for the coming years. The SEP showed the Fed’s median forecasts calling for one interest rate cut in 2026 in line with September’s projections.
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Furthermore, the Federal Reserve also says it plans to have at least one additional interest rate cut in 2026, but doesn’t have an estimated date for that cut. Three fed officials, including Trump-favored Stephen Miran, voted against the cut, with Miran preferring a steeper 50 bps cut.