US Fed cuts rates by 25 bps as unemployment edges up and outlook remains uncertain

WASHINGTON: The US Federal Reserve reduced the federal funds rate by 25 basis points (0.25 percentage point), citing rising downside risks to employment and a moderate pace of economic expansion. The decision was announced after the Jerome Powell-led Federal Open Market Committee (FOMC) concluded its meeting on Wednesday (local time).

The new target range now stands between 3.5 per cent and 3.75 per cent, down from 3.75 per cent to 4 per cent. In an official statement, the Fed said that available indicators suggest economic activity has been expanding at a moderate pace. It stated, “Job gains have slowed this year, and the unemployment rate has edged up through September. More recent indicators are consistent with these developments”.

The Fed added that inflation has increased since earlier in the year and remains somewhat elevated. At the same time, uncertainty around the economic outlook remains high. The Committee said it is closely watching risks on both sides of its dual mandate, maximum employment and 2 per cent inflation.

The Federal Open Market Committee voted 9-3 Wednesday to lower the benchmark federal funds rate by a quarter point. Chair Jerome Powell said the two goals of the Fed are “a bit in tension” https://t.co/MX33jgrU0C pic.twitter.com/jE6J1EsbmF

— Bloomberg TV (@BloombergTV) December 10, 2025

The Fed observed that downside risks to employment have risen in recent months. Considering this shift in the balance of risks, the FOMC decided to lower the target range for the federal funds rate by 25 bps, bringing it down to 3.50 per cent to 3.75 per cent.

The Committee said it will continue to carefully assess incoming economic data, changes in the outlook, and the evolving risk environment while evaluating the timing and scale of any additional adjustments to interest rates. It reaffirmed its strong commitment to supporting maximum employment and returning inflation to its 2 per cent objective.

The Fed also said it will keep monitoring the implications of new information for the economic outlook and is prepared to adjust the stance of monetary policy if risks emerge that could impede the achievement of its goals. In its policy review, the Committee said it will take into account a wide range of indicators, including labour market conditions, inflation pressures, inflation expectations, and financial and international developments. (ANI)