Fed Cuts Interest Rates by 25 Basis Points as Economic Uncertainty Mounts

The U.S. Federal Reserve implemented a widely anticipated 25 basis point rate cut on Wednesday, lowering the federal funds target range to 3.50%–3.75%. This marks the third consecutive quarter-point reduction and brings short-term borrowing costs to their lowest level since 2022. The Fed emphasized that “uncertainty about the economic outlook remains elevated,” noting growing downside risks to employment based on recent data. Policymakers also highlighted declining reserve balances and announced plans to purchase short-term Treasury bills as needed to ensure an ample supply of reserves.

Bitcoin’s price reacted with brief volatility following the announcement, hovering near $92,400, while U.S. stocks posted modest gains and the 10-year Treasury yield dipped to 4.15%. The decision is especially notable given the unusually public disagreements among Fed officials in recent weeks. Kansas City Fed President Jeffrey Schmid and Chicago Fed President Austan Goolsbee dissented, preferring to keep rates unchanged, while Fed Governor Stephen Miran advocated for a larger 50 basis point cut.

Updated economic projections released alongside the decision show core inflation easing to 3% in 2025 and 2.5% in 2026, both slight improvements from prior forecasts. GDP growth expectations also increased, with the Fed now projecting 1.7% growth in 2025 and 2.3% in 2026. Despite market expectations of multiple cuts next year, the Fed’s dot plot still points to just one cut in 2026.

The rate decision comes amid delays in key economic data due to the ongoing U.S. government shutdown and heightened political pressure as President Trump continues to criticize Fed Chair Jerome Powell ahead of his term ending next year. Markets now assign a 24% probability of another rate cut in January, according to CME FedWatch, as investors look to Powell’s upcoming press conference for clues on the future path of monetary policy.