The U.S. Federal Reserve concluded its final policy meeting of 2025 with another adjustment to monetary conditions, cutting the federal funds rate by 25 basis points and setting the target band at 3.50%–3.75%.
In a statement following the announcement, the Federal Open Market Committee (FOMC) noted that while economic activity continues to grow at a moderate pace, the labour market has cooled. Job creation slowed through the year, and unemployment ticked higher by September, with recent data reinforcing this trend. The Fed acknowledged that inflation, though elevated, has risen modestly in recent months.
The committee reiterated its commitment to achieving maximum employment and long-term inflation of 2%. However, it cautioned that uncertainty surrounding the economic outlook remains significant, highlighting increased downside risks to the labour market.
With this shift in balance, policymakers opted for a 0.25% reduction in the benchmark rate. The FOMC emphasised that subsequent policy moves will be guided by evolving economic data, risk assessments, and inflation expectations. The statement reaffirmed that the Fed remains dedicated to returning inflation to its 2% target while supporting employment.
Officials also signalled readiness to adjust policy further if emerging risks threaten economic stability. Evaluations will continue to account for labour market conditions, inflation indicators, and global financial developments.
The Fed added that reserve balances have reached what it considers adequate levels and announced the initiation of shorter-term Treasury security purchases to sustain liquidity as needed.
Voting in favour of the decision were Chair Jerome Powell and eight other members including Williams, Barr, Bowman, Collins, Cook, Jefferson, Musalem, and Waller. Three members dissented: Stephen Miran, who supported a deeper cut of 50 basis points, and Austan Goolsbee and Jeffrey Schmid, who favoured no change.
