The Federal Reserve approved a widely expected 25 basis point rate cut on Wednesday, lowering the federal funds target range to 3.50%–3.75% and extending its streak of quarter-point reductions to three. The move brings short-term interest rates to their lowest level since 2022 and comes as policymakers continue to work without several key data releases paused by the ongoing U.S. government shutdown.
In its statement, the Fed emphasized that “uncertainty about the economic outlook remains elevated,” noting that downside risks to the labor market have increased in recent months. The central bank also pointed to falling reserve balances and said it stands ready to conduct purchases of shorter-term Treasuries if needed to ensure sufficient liquidity in the banking system.
Markets reacted cautiously to the news. Bitcoin briefly fluctuated before settling near $92,400, U.S. equities posted slight gains, and the 10-year Treasury yield eased to 4.15%.
The decision stood out for its rare public discord among Federal Open Market Committee members. Kansas City Fed President Jeffrey Schmid and Chicago Fed President Austan Goolsbee voted to keep policy unchanged, while Governor Stephen Miran dissented on the other extreme, arguing for a larger 50 basis point cut.
Updated Economic Outlook
Alongside the policy announcement, the Fed released new projections. Core inflation expectations edged down to 3% for 2025 and 2.5% for 2026. Economic growth forecasts were revised higher, with GDP now expected to rise 1.7% next year and 2.3% in 2026. Meanwhile, the committee’s dot plot remains largely steady, still showing only one rate cut penciled in for 2026—undershooting market expectations for two cuts in 2025.
The announcement comes amid limited economic visibility due to the shutdown and growing political pressure from President Trump, who has repeatedly criticized Chair Jerome Powell while weighing possible successors ahead of Powell’s term ending next year.
Investors now look to Powell’s press conference at 2:30 p.m. ET for additional guidance on how the Fed views future rate decisions. Ahead of his remarks, traders are pricing in roughly a 24% chance of another reduction at the January meeting, according to CME FedWatch.
