Washington, D.C., December 11, 2025 – The U.S. Federal Reserve on Wednesday lowered the target range for the federal funds rate by 25 basis points to 3.5–3.75%, marking its third rate cut in 2025. The decision was approved by a 9-3 vote of the Federal Open Market Committee (FOMC), reflecting the first meeting with three dissenters since September 2019, highlighting internal divisions over the pace of monetary easing.
The move had been largely expected by financial markets, with the CME FedWatch Tool indicating an 89% probability of a 25-basis-point reduction. In a statement, the FOMC noted,
“Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months.”
The committee added that economic activity continues to expand moderately, while job gains have slowed and the unemployment rate edged higher through September. Inflation has increased since earlier in the year and remains above target, reinforcing the Fed’s long-term goal of achieving 2% inflation.
Recent labor market data have raised concerns. The slowdown in hiring prompted the Fed to resume rate cuts in September, even as inflation remained around 1 percentage point above the target. According to ADP, U.S. private companies cut 32,000 jobs in November, defying forecasts for a 40,000-job gain.
Experts noted particular strain among young workers, describing the labor market as an “exclusive club” favoring insiders. Small businesses with fewer than 50 employees lost 120,000 jobs, while mid-sized and large companies continued adding positions.
The 43-day federal government shutdown in late 2025 compounded labor market challenges and disrupted macroeconomic data collection. Fed Chair Jerome Powell highlighted the shutdown during his post-meeting press conference, noting delays in inflation data and slower economic activity during October and November.
The Bureau of Labor Statistics will release November employment data on December 16, though October unemployment data remains unavailable due to the shutdown. Analysts caution that revisions may be necessary given the gaps in real-time economic data.
Looking forward, the Fed emphasized a data-dependent approach, stating,
“In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.”
Powell described the Fed as “well positioned to wait and see how the economy evolves,” suggesting a pause in further rate cuts for the near term. Analysts at ING Bank forecast two 25-basis-point cuts in 2026, potentially in March and June, citing ongoing labor market concerns.
The Fed’s decision underscores its focus on balancing economic growth, employment, and inflation amid lingering uncertainties from the labor market and recent government disruptions.