WASHINGTON – โขThe โfederal Reserve on โฃWednesday โฃlowered its benchmark interest rateโ by 25 basis points, marking the first โคrate cut senceโ January 2023, but signaled uncertainty โabout further reductions inโฃ December amid persistent inflation concerns. The move brings the federal funds rate to a target โคrange of 5.25%-5.50%.
The decision comes as the U.S. economy shows signs of cooling,โ yet inflation remainsโค above the fed’s 2% target.Septemberโ 2025 inflationโ rose to 3.0% year-on-year, up fromโฃ 2.9%โ in August,โ with coreโค inflationโค also at 3.0%โ in September. This delicate balance-slowing growth versus sticky inflation-is forcing the Fed to proceed โฃcautiously, leaving the door open to further adjustments but offering no firm commitments.The rate cut impacts borrowing โcosts for consumers and businesses, โขpossibly stimulating economic activity, but the โคfuture path of monetary policy hinges on incomingโค economic data.
Fed Chair Jeromeโฃ Powellโ stated, “This is how we believe and hope this will work.” He indicated that without theโฃ impact of tariffs, inflation is “not that far fromโค our 2% target.” The Fedโฃ estimates tariffs will contribute 0.5-0.6 percentage points to the core personal consumption price indexโ (core PCE), suggesting core PCE inflation could be in the range of โข2.3%-2.4% if tariffs where excluded.Powell acknowledged tariffs are likely to cause a “one-off increase,” with potential for further rises.
Alongside the rate โdecision, theโ Fed announcedโค the โคconclusionโ of its three-year program โฃto reduce its balance sheet on โขDecember 1. The portfolio,which โpeaked at approximatelyโข $9 trillion in mid-2022โ due to pandemic-era financing,has been reduced to around $6.6โฃ trillion.
The โคproclamation triggered aโ mixed reaction in U.S. โstock markets. The Dowโ Jones โฃIndustrial Average initially โคreachedโค a โขrecord high, rising 334 points, before reversing course to close down 74.37 points, or โค0.16%, at 47,632.00.โข The S&P 500 โขended slightly โlower atโ 6,890.59, โwhile the โขNasdaq composite outperformed, gaining 0.55% to a new record close of 23,958.47,โ boosted by nvidiaโฃ shares. The market’s โขvolatility reflectsโฃ investor uncertainty about the Fed’sโฃ future actions.
