The US Federal Reserve on Wednesday made a widely expected 25 basis point rate cut, reducing the range of its benchmark federal funds rate by 25 basis points, to between 3.50% and 3.75%. This marks the third consecutive quarter-point reduction and brings short-term borrowing costs to their lowest level since 2022.
“Uncertainty about the economic outlook remains elevated,” the Federal Reserve said in its policy statement. “The Committee is alert to the risks to both sides of its dual mandate and believes that the downside risks to employment have increased in recent months.”
In its statement, the Federal Reserve also noted that reserve balances had declined and said it intends to begin purchasing short-term Treasury securities as needed to “maintain an ample supply of reserves.”
The price of bitcoin It was volatile in the minutes following the news but held around the $92,400 level. U.S. stocks rose modestly and the 10-year Treasury yield fell two basis points to 4.15%.
Today’s rate cut is of particular interest given the unusually large amount of public dissent among members of the Federal Reserve over the course of monetary policy. In recent weeks, several had loudly voiced their opposition not only to today’s easing, but also to the central bank’s 25 basis point cut at its previous meeting in October.
In fact, two members (Jeffrey Schmid of the Kansas City Fed and Austan Goolsbee of the Chicago Fed) voted to keep policy stable. A third member, Federal Reserve Governor Stephen Miran, recently appointed by Trump, voted in favor of a 50 basis point cut.
Update of economic projections
In addition to the policy decision, this Federal Reserve meeting was accompanied by an updated set of economic projections from the central bank.
Core inflation is now forecast at 3% in 2025 and 2.5% in 2026, each 10 basis points lower than previous estimates. GDP growth is expected to be 1.7% this year and 2.3% in 2026, up from 1.6% and 1.8% previously estimated, respectively.
The so-called “dot plot” has changed little, and policymakers still see only one rate cut in 2026, even as markets have priced in two rate cuts next year.
Today’s news comes at a time when authorities are still operating without the release of several key economic data that remain delayed or suspended due to the US government shutdown. Also at stake is President Trump’s continued attack on current Federal Reserve Chair Jerome Powell, along with his search for a replacement when Powell’s term as chair ends next year.
Attention now turns to Powell’s post-meeting press conference at 2:30 p.m. ET, where listeners will attempt to better discern his and the Federal Reserve’s thoughts on the future path of monetary policy. Before Powell’s appearance, traders had priced in a 24% chance of another rate cut in January, according to CME FedWatch.
