Federal Reserve Cuts Benchmark Rate 25 Basis Points to 3.50%–3.75%

By James, Admin
December 10, 2025 – 8:00 PM CST, Chicago, IL

The Federal Reserve today lowers its benchmark federal funds target range by 25 basis points to 3.50% to 3.75%, marking its third consecutive rate cut this year. The decision follows the conclusion of the Federal Open Market Committee’s two-day policy meeting in Washington.

In its official statement released at 2:00 p.m. ET, the FOMC says, “Recent indicators suggest that economic activity has continued to expand at a moderate pace. Job gains have slowed, and the unemployment rate has edged up but remains low.” The committee adds that inflation “has eased over the past year but remains somewhat elevated.”

The vote passes 9–3. Governors Lisa Cook and Philip Jefferson support the reduction, while three regional Federal Reserve Bank presidents dissent, preferring to hold rates steady. The dissenters cite concerns that inflation progress may stall.

Chair Jerome Powell says during his press conference that the committee is responding to “clear evidence that labor market tightness is moderating.” He notes that nonfarm payroll growth has averaged 118,000 per month over the last three months, down from 210,000 earlier in the year.

The Bureau of Labor Statistics reports last week that the unemployment rate has risen to 4.3%, up from 3.8% six months ago. Average hourly earnings are increasing at a 3.9% annual pace, down from over 4.5% earlier this year.

Core Personal Consumption Expenditures (PCE), the Fed’s preferred inflation gauge, is running at 2.7% year-over-year as of the latest reading. That figure remains above the central bank’s 2% target but has declined from 3.4% earlier in the year.

Powell states, “We are not declaring victory on inflation. We are recalibrating policy in light of evolving risks.” He emphasizes that monetary policy remains restrictive despite today’s reduction.

The updated Summary of Economic Projections shows policymakers expect GDP growth of 1.8% for the year, down from a prior forecast of 2.1%. The median projection for unemployment rises to 4.4% next year.

Financial markets react immediately. The Dow Jones Industrial Average rises more than 350 points in late afternoon trading. The S&P 500 gains 1.1%, while the Nasdaq Composite climbs 1.4%.

Treasury yields fall following the announcement. The 2-year yield drops approximately 11 basis points to 3.62%, reflecting expectations of additional easing in 2026.

Powell declines to signal a preset path for future cuts. “Decisions will be made meeting by meeting,” he says. “We will assess incoming data, the evolving outlook, and the balance of risks.”

The Fed’s balance sheet reduction program continues unchanged. The central bank maintains caps on Treasury and mortgage-backed securities runoff.

Business groups respond positively to the move. The U.S. Chamber of Commerce releases a statement saying the reduction “provides appropriate flexibility as economic growth moderates.”

However, some policymakers voice concern. Kansas City Fed President Jeffrey Schmid says in a separate statement that inflation risks “remain skewed to the upside.”

Today’s decision marks a shift from the aggressive tightening cycle that began in 2022, when the Fed raised rates from near zero to combat the highest inflation in four decades.

As of this afternoon, the federal funds rate stands at its lowest level since early 2024, with policymakers signaling continued caution as inflation remains above target.