US Fed Cut Interest Rate by 0.25%: Marking Third Rate Cut in 2025

The US Federal Reserve has cut interest rates for the third time this year, even as growing internal disagreements cast doubt on whether further reductions are likely in the near future.

On Wednesday, the central bank announced a 0.25 percentage-point reduction to its benchmark lending rate, bringing it down to a range of 3.50% to 3.75%, the lowest level seen in 3 years. However, policymakers remain split over how to navigate competing economic pressures, with low job growth on one side and persistent inflation on the other.

Rising Rifts Between Fed Members

Fresh economic forecasts released the same day point to just one rate cut next year, though officials emphasised that upcoming data could shift that outlook. The latest rate cut was not backed unanimously, highlighting widening rifts within the central bank as members debate how best to respond to an increasingly uncertain economic landscape.

Powell Stressed on Rising Inflation and Unemployment

Fed Chair Jerome Powell stressed that the central bank needs time to evaluate the impact of this year’s trio of cuts. He said officials will scrutinise new economic numbers closely before the Fed’s next meeting in January. “We are well-positioned to wait and see how the economy evolves,” Powell told reporters.

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Powell acknowledged that the Fed is in a “very challenging situation,” juggling the risks of both rising inflation and growing unemployment. “You can’t do two things at once,” he noted.

Complicating matters, the Fed’s decision came at a time when major gaps remained in government data normally used to gauge economic health. The recent record-setting 43-day government shutdown disrupted the work of key agencies, such as the Department of Labour, preventing the collection of crucial economic indicators.

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