The Federal Reserve Cuts Rates by 25 Basis Points: Treasury Buying Program Kicks Off

The Federal Reserve has delivered its third consecutive rate cut, lowering the benchmark interest rate to a 3.50%-3.75% range on December 10, 2025. While the vote showed broad support with nine votes in favor, three dissenting members revealed emerging divisions over the pace of monetary easing.

What Changed: Interest Rate Moves and the Dot Plot

The 25 basis point reduction brings the fed funds rate down from the previous level, reflecting the central bank’s response to economic uncertainty and rising employment risks. Notably, the policy statement removed the language describing unemployment as “low,” signaling concern about labor market cooling.

Looking ahead, the Fed’s latest dot plot projects another 25 basis point cut in 2026, suggesting policymakers expect continued rate-cutting cycles pending economic developments. This forward guidance reflects the committee’s cautious stance amid persistent inflation concerns and moderating growth.

Treasury Purchasing Program: $40 Billion in Motion

Beyond rate cuts, the Federal Reserve announced it will purchase $40 billion in Treasury securities over the next 30 days, beginning December 12. This initiative aims to maintain adequate reserve balances in the banking system, a critical tool for managing money market liquidity and supporting financial stability.

The Fed views reserve levels as having declined to an appropriate level, prompting the shift toward purchasing short-term U.S. Treasury securities to preserve ample reserves on an ongoing basis.

The Voting Record: 9-3 Split Tells a Story

The committee vote reflected nuanced disagreements on the appropriate policy path. While Chair Jerome Powell and seven other voting members supported the 25 basis point cut, dissents came from three angles: Stephen Miran argued for a deeper 50 basis point cut, while Austan Goolsbee and Jeffrey Schmid preferred holding rates steady.

This split suggests growing debate within the Fed about whether further easing is warranted or whether the pace should slow.

Operational Mechanics: How the Fed Will Execute

The reverse repurchase facility standing rate is set at 3.50%, with a daily limit of $160 billion per counterparty. The overnight repurchase rate sits at 3.75%. The Fed also lowered the primary credit rate by 25 basis points to 3.75%, effective immediately.

These operational adjustments ensure the fed funds rate stays within its target corridor while supporting banking system operations.

The Bigger Picture: What This Means

The Fed’s actions reflect heightened concerns about employment trends and economic momentum, even as inflation remains above the 2% target. By combining rate cuts with Treasury purchases, policymakers are signaling a shift toward accommodative policy, though the 9-3 vote warns that consensus around further easing may be weakening.

Market participants are now watching whether the projected 2026 basis point cuts materialize or if economic data prompts the Fed to reassess its trajectory.