The US Federal Reserve, chaired by Jerome Powell, decided to cut the federal funds rate by 25 basis points to a target range of 3.75% to 4.00% on October 29, 2025.
This marks the second consecutive rate cut by the Fed this year, amid persistent inflationary pressures and ongoing uncertainty in the US economy.
1. Fed Announces 25 bps Rate Cut
The Federal Open Market Committee (FOMC) voted 10–2 in favor of lowering the policy rate.
The statement highlighted that the decision was taken “in light of the shift in the balance of risks,” reaffirming the Fed’s commitment to monitor economic data closely before any future action.
The move brings cumulative rate cuts for 2025 to 50 bps, following a similar decision in September 2025 after the Fed kept rates unchanged for nine months since December 2024.
Focus keyword: US Fed rate cut October 2025
2. December Rate Cut Not Guaranteed
When asked about a possible rate cut in December 2025, Jerome Powell clarified that no decision has been made yet.
“A further reduction in the policy rate at the December meeting is not a foregone conclusion,” Powell said.
The Fed Chair added that there are “strongly different views” within the committee and that the FOMC will base future decisions on incoming economic data and inflation trends.
3. Inflation Pressures Remain High
Inflation remains a major concern for the US economy.
According to Powell, consumer price inflation (CPI) rose to 3.0% in September 2025, up from 2.9% in August.
He attributed the uptick to rising goods prices, largely driven by tariffs on imports re-introduced under President Donald Trump’s administration.
“Goods prices are increasing due to tariffs, reversing the long-term trend of mild deflation,” Powell noted.
The Fed’s medium-term target remains to bring inflation back to 2%, but officials acknowledge that supply chain bottlenecks and trade policies continue to weigh on progress.
4. Labour Market Showing Signs of Slowdown
The FOMC statement acknowledged that job growth has slowed in 2025, and the unemployment rate has inched up, though it remains historically low.
Jerome Powell linked the slowdown to a decline in immigration and a lower labour force participation rate.
“The supply of workers has dropped mainly due to immigration restrictions, reducing the need for new jobs,” he explained.
Economists interpret this as a sign that the Fed might be walking a tightrope — balancing between supporting employment and containing inflation.
5. Economic Uncertainty Remains Elevated
The Fed emphasized that economic uncertainty remains elevated, especially given the recent government shutdown and incomplete economic data available to policymakers.
“The Committee will carefully assess incoming data, the evolving outlook, and the balance of risks before any further adjustments,” the statement read.
The FOMC reiterated its dual mandate of achieving maximum employment and price stability, aiming to guide the US economy toward a sustainable path of growth.
Market Reaction
Following the announcement, US stocks fell slightly, with the Dow Jones, Nasdaq, and S&P 500 each dropping nearly 1%.
Analysts believe investors are weighing the possibility that the Fed could pause in December if inflation does not cool as expected.
However, bond markets reacted positively, with Treasury yields declining as investors priced in a potential rate cut cycle extending into early 2026.
What to Expect Next
Financial experts expect the Fed to remain data-driven through the end of 2025.
If inflation continues to hover above 3% and the labour market weakens further, the FOMC could announce another 25 bps cut in December or early 2026.
Meanwhile, markets will closely watch CPI data, employment reports, and Trump administration trade policies for clues on the Fed’s next move.
