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U.S. Federal Reserve Cuts Interest Rates to 3.75–4.00% in Second Consecutive Move
Summary:
The Federal Reserve cut interest rates by 25 basis points to 3.75%–4.00%, marking its second consecutive reduction amid persistent inflation, a weakening labour market, and a U.S. government shutdown. While signalling possible future cuts, Chair Jerome Powell stressed that further easing will depend on incoming data and economic conditions.
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The Federal Open Market Committee (FOMC), led by Jerome Powell, announced on Wednesday, 29 October 2025, a 25-basis-point reduction in the benchmark federal-funds rate, lowering the target range to 3.75 per cent to 4.00 per cent.
This marks the second rate cut in as many months—following a similar 25-basis-point reduction in September—and ends the pause in policy-action that extended from December 2024 until last month.
The decision comes against a backdrop of persistent inflation, which remains above the Fed’s 2 per cent target, and a weakening labour-market. The uncertainty is further exacerbated by a full-scale U.S. government shutdown, which has disrupted the release of key economic data and complicated the Fed’s outlook.
In its official statement, the Fed acknowledged that “uncertainty about the economic outlook remains elevated” and flagged that “downside risks to employment have risen in recent months”.
While the committee has signalled that additional cuts may be appropriate, it emphasised that future adjustments will depend on incoming data and that policy is not on a preset path. Chair Powell stressed that a further reduction in December is “not a foregone conclusion”.
In summary, the FOMC is responding to a softer labour market and deteriorating economic signals by cutting rates, but remains cautious given inflation still runs hot and data remain limited. The bank is holding open the possibility of additional easing, but only if the risk-balance shifts decisively in favour of further support.
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