The US Federal Reserve has cut its benchmark interest rate by 25 basis points to a range of 3.50%–3.75%, marking the third consecutive rate reduction this year as the central bank seeks to support the economy amid slowing job growth and persistent inflation pressures.
The decision, made at the Federal Open Market Committee’s December meeting, was accompanied by unusually clear messaging that further cuts may not come easily. In its quarterly economic projections, the Fed indicated it expects only one additional rate cut next year, a more reserved outlook than many market participants had anticipated.
Officials are deeply divided about future policy. Three Fed members dissented, the most in years, with one voting for a larger 50-basis-point cut and two preferring to keep rates unchanged. This split highlights competing views among policymakers, some focused on boosting hiring amid signs of labour market softness, and others prioritising inflation control because prices remain above the Fed’s 2% target.
Fed Chair Jerome Powell framed the decision as data-dependent, saying officials want to see more information on inflation, employment and broader economic trends before moving further on rates. With inflation still elevated and unemployment having risen modestly in recent months, the central bank signalled it may pause after this cut to assess how the economy evolves.
The rate reduction, the lowest level in nearly three years, is expected to help ease borrowing costs for households and businesses in areas such as mortgages, auto loans and credit cards, though actual borrowing costs will also depend on broader market conditions.
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