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Fed trims rates for third time in 2025
The US Federal Reserve lowered its benchmark lending rate by a quarter point on Wednesday, setting the target range at 3.50 %-3.75 %, the lowest in three years. The move comes as officials weigh a cooling labour market against persistent inflation.
Divided vote signals uncertain path ahead
The decision was not unanimous. Three regional Fed presidents broke ranks: Stephen Miran, temporarily seconded from the White House Council of Economic Advisers, pushed for a half-point cut, while Chicago's Austan Goolsbee and Kansas City's Jeffrey Schmid favoured no change.
Fed Chair Jerome Powell told reporters the committee is "well-positioned to wait" for fresh data before its January meeting, acknowledging "persistent tension" between the central bank's dual mandates of price stability and maximum employment.
Economic crosscurrents cloud outlook
September figures showed unemployment edging up to 4.4 %, while inflation remained at 3 %, still above the Fed's 2 % target. Analysts say recent softer inflation prints have given policymakers room to support hiring by easing borrowing costs.
"The conundrum is political pressure to cut rates while inflation stays elevated,"
Colleen McHugh, Wealthify consultant, BBC Today programme
McHugh expects one or two additional cuts in 2026.
Trump presses for deeper reductions
President Donald Trump, who has repeatedly urged lower rates, called Wednesday's cut "too modest" during a White House roundtable. "Our rates should be the lowest globally," he said.
A November government shutdown delayed key economic reports, leaving policymakers with an incomplete picture. Next week's November jobs and inflation data could shift the debate toward further easing if labour-market weakness persists.
Succession race adds to policy uncertainty
Trump is expected to name Powell's successor within weeks, with former White House economic adviser Kevin Hassett seen as the front-runner. Other contenders include Fed Governor Christopher Waller and Treasury Secretary Scott Bessent.
Markets are watching closely for signals of independence; any perception of political influence could increase volatility, analysts warn.
"The next chair must project independence, or markets will react sharply,"
Thomas Hoenig, Mercatus Center senior fellow
Powell insisted Wednesday that the succession process has not affected his current decisions.
