The Federal Reserve lowered interest rates by 25 basis points on Wednesday, setting the federal funds target range at 3.50%–3.75%. The move — the third straight quarter-point cut — had been widely anticipated and brings rates to their lowest level since 2022. Policymakers delivered the decision despite operating without several major economic reports that remain delayed because of the ongoing U.S. government shutdown.
In its accompanying statement, the Fed cautioned that the economic outlook “remains elevated” in uncertainty and noted rising downside risks to employment. Officials also pointed to shrinking reserve balances, signaling readiness to buy short-term Treasuries when needed to keep liquidity conditions stable.
Initial market reaction was relatively subdued. Bitcoin whipsawed before settling around $92,400, U.S. equities inched higher, and the 10-year Treasury yield dipped to 4.15%.
The vote revealed deep divisions inside the FOMC. Kansas City Fed President Jeffrey Schmid and Chicago Fed President Austan Goolsbee dissented in favor of holding rates steady, while Governor Stephen Miran — appointed earlier this year — argued for a larger 50 basis point cut.
Fresh Forecasts: Lower Inflation, Slightly Higher Growth
The Fed’s updated projections showed modest improvements in both inflation and growth expectations. Core inflation is now forecast at 3% in 2025 and 2.5% in 2026, each trimmed by 10 basis points. GDP growth estimates were revised upward to 1.7% for next year and 2.3% for 2026. The dot plot, however, showed little change, with officials still expecting only one rate cut in 2026 even as markets project two cuts in 2025.
The decision arrives at a politically sensitive moment. Powell continues to face criticism from President Trump, who has signaled he is evaluating potential replacements ahead of the Fed chair’s term ending next year.
All eyes now shift to Powell’s press conference at 2:30 p.m. ET, where traders hope to clarify the central bank’s thinking. As of Wednesday afternoon, futures markets were pricing in a 24% chance of another rate cut at the January meeting, per CME FedWatch.
