US Fed Meeting: The United States Federal Reserve’s Federal Open Market Committee (FOMC), after its two-day policy meeting, decided to cut the key interest rate by 25 basis points to the range of 3.50% to 3.75%, according to the official statement released on Wednesday, 10 December 2025.
Fed’s December rate cut marks the third consecutive time the US central bank has lowered its benchmark interest rates starting from September 2025. The Federal Reserve has cut a total of 75 basis points in 2025, after it kept the interest rates unchanged from December 2024.
5 key highlights from US Fed’s policy decision
Here are five key highlights from the US Federal Reserve’s policy decision and Chairman Jerome Powell’s speech from 10 December 2025:
1. Fed cuts interest rates
Federal Reserve Chairman Jerome Powell-led FOMC cut the key benchmark interest rates by 25 basis points to the range of 3.50% to 3.75% as the central bank seeks to wait for upcoming US economic data to determine the interest rate trajectory in the upcoming year.
Nine out of the 12 members voted in favour of the Fed’s policy decision to cut the interest rates, while one out of the remaining three was looking for a 50 basis point rate cut, and the other two wanted to keep the interest rates unchanged at their previous levels.
“In support of its goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 3-1/2 to 3‑3/4 per cent,” said the FOMC.
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2. Will there be a rate cut ahead?
Looking at the interest rate trajectory, Fed Chair Jerome Powell said that the central bank will either hold the interest rates or cut them in the upcoming Fed meeting next year, as the Fed now enters a wait-and-watch mode for upcoming economic data.
Powell, in his address, dismissed the statement that the central bank is not looking to hike its key interest rates anytime soon amid the overall closer to neutral stance, in line with its dual mandate.
“I don’t think that a rate hike is anybody’s base as the next thing is anybody’s base case at this point, I’m not hearing that. What you see is some people feel we should stop here and that we’re at the right place and just wait,” said Powell.
3. Inflation concerns
Although the US Fed cut interest rates for the third time on 10 December 2025, the 25 basis point rate cut to 3.50% to 3.75% interest rates comes amid elevated inflation levels in the US economy and a slowing job market.
“Job gains have slowed this year, and the unemployment rate has edged up through September. More recent indicators are consistent with these developments. Inflation has moved up since earlier in the year and remains somewhat elevated,” said the FOMC.
The central bank reiterated its focus on the dual mandate of maximising employment while bringing the inflation levels to its 2% goal. However, the rate cut comes amid September 2025 employment data released in November, which suggests that the unemployment rate rose to 4.4% in the period, while the country added 119,000 jobs despite the government shutdown.
4. Downside risk to labour market?
The US labour market and employment are facing downside risks in recent months, as the US Fed acknowledged the risk of both inflation and the labour market side of its dual mandate.
“The Committee seeks to achieve maximum employment and inflation at the rate of 2 per cent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months,” said the Fed in its policy announcement.
The interest rate easing move is aimed at stabilising the labour market while allowing inflation to resume its downward trend toward the 2% goal after the effects of the tariffs have passed.
However, Chair Powell also highlighted that the unemployment rates in the US economy may hit 4.5% by the end of 2025 as the downside risk to employment appears to be rising in recent months.
5. US reserves in focus
The US Federal Reserve highlighted that the reserve balances have declined, and the central bank now aims to purchase short-term bonds in an effort to maintain an ample supply of reserves on an ongoing basis.
“The Committee judges that reserve balances have declined to ample levels and will initiate purchases of shorter-term Treasury securities as needed to maintain an ample supply of reserves on an ongoing basis,” said the US Fed.
All eyes will now be on the upcoming US economy data release to potentially gauge the outcome of the Federal Reserve’s first policy decision of 2026.
Read all stories by Anubhav Mukherjee
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