Fed Lowers Rates for 3rd Time

2025-12-10 19:00 By Joana Taborda 1 min. read

The Federal Reserve cut the federal funds rate by 25 bps to a range of 3.5%–3.75% in its December 2025 meeting, following similar reductions in September and October, and in line with expectations.

This brings borrowing costs to their lowest level since 2022.

The committee remained divided, with three members continuing to vote against the cut, which hasn’t happened since September 2019.

Stephen Miran pushed for a deeper 50bps reduction, in contrast to Austan Goolsbee and Jeffrey Schmid, who argued for keeping rates on hold.

Meanwhile, policymakers left their projections for the federal funds rate unchanged from September, signaling only one 25bps cut in 2026.

On the GDP front, the Fed revised its growth forecasts higher for 2025 (1.7% vs 1.6%) and 2026 (2.3% vs 1.8%).

PCE inflation is now expected to be slightly lower this year at 2.9% (vs 3.0%) and next year at 2.4% (vs 2.6%).

Forecasts for the unemployment rate were left unchanged at 4.5% for 2025 and 4.4% for 2026.



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