Fed Cuts Rates by 25 Basis Points Amid Slowing Job Growth; Treasury Bill Purchases to Resume

The Federal Reserve has reduced its benchmark interest rate by 25 basis points, bringing the target range to 3.50% to 3.75%. This marks the third consecutive rate reduction and reflects the central bank’s response to a shifting economic landscape characterized by cooling labor market dynamics and persistent inflation concerns.

Economic Conditions Drive the Decision

Recent data paints a picture of moderate economic expansion paired with labor market softening. Job creation has decelerated noticeably throughout 2025, with the unemployment rate climbing as of September. Inflation, which has edged upward from the start of the year, continues to occupy elevated levels despite the Fed’s easing cycle.

The Committee emphasized that uncertainty surrounding the economic outlook remains pronounced. Most notably, policymakers flagged growing downside risks to employment in recent months, signaling concern about potential further deterioration in the labor market.

Voting Details: A Split Decision

The rate cut decision passed with a 9-3 vote, revealing fissures within the Committee:

Supporting the 25 basis point reduction were Chair Jerome H. Powell, Vice Chair John C. Williams, Michael S. Barr, Michelle W. Bowman, Susan M. Collins, Lisa D. Cook, Philip N. Jefferson, Alberto G. Musalem, and Christopher J. Waller.

Dissenting votes came from three members:

• Stephen I. Miran advocated for a more aggressive half-percentage-point reduction
• Austan D. Goolsbee and Jeffrey R. Schmid preferred to hold rates steady at the current level

Forward Guidance and Future Expectations

The Fed’s latest dot plot projection signals one additional 25 basis point rate cut anticipated in 2026, suggesting a more gradual approach to monetary easing going forward. Policymakers committed to carefully assessing upcoming economic data and the evolving outlook before determining the timing and magnitude of any further adjustments.

Reserve Management and Treasury Operations

The central bank announced it will acquire $40 billion in Treasury bills within 30 days beginning December 12 to bolster reserve supply. This initiative represents a shift in operational focus as the Fed transitions from balance sheet reduction to reserve management aimed at ensuring adequate liquidity in the financial system.

The primary credit rate was simultaneously reduced by 25 basis points to 3.75%, effective the same date. These coordinated actions underscore the Fed’s commitment to maintaining favorable financial conditions while supporting maximum employment and price stability objectives.