The GBP/USD pair experienced new falls during intraday trading after the Federal Reserve cut interest rates by 25 basis points on Wednesday, an action that was largely anticipated. The Federal Open Market Committee (FOMC) met the expectations but, interestingly, their lack of strong commentary meant that the market didn’t react dramatically.
After the Fed’s announcement, the British pound (GBP) confronted new challenges, particularly as the Fed indicated it would continue its quantitative easing (QE), transitioning mortgage-backed assets into long-term government bonds by December 1.
Is December’s rate cut a triple repeat?
This marks the second consecutive year that the Fed has reduced interest rates. However, it seems that this decision might not halt further declines, even if some policymakers anticipate a rise in inflation pressures later this year.
With the second rate cut now confirmed, investors are likely to return quickly to “rate cut watch” mode, looking ahead to a potential third cut when the FOMC gathers again on December 10 for another announcement.
GBP/USD 5 minute chart
Economic Indicators
Fed Interest Rate Decisions
The Federal Reserve (Fed) discusses monetary policy and establishes interest rates during eight scheduled meetings each year. The Fed is responsible for maintaining inflation around 2% while promoting full employment. Adjusting interest rates is a key tool in this process. When rates are raised, the US dollar (USD) usually appreciates due to increased foreign investment. Conversely, lowering rates often leads to a weaker dollar as capital flows to countries offering better returns. If rates remain steady, focus shifts to the tone of the FOMC’s statement, which can be either hawkish (suggesting higher future rates) or dovish (indicating lower rates ahead).
Final Release:
Wednesday, October 29, 2025 18:00
Frequency:
Irregular
Actual:
4%
Consensus:
4%
Previous:
4.25%
Fed Frequently Asked Questions
Monetary policy in the U.S. is guided by the Federal Reserve Board (Fed), which aims for price stability and full employment. Adjusting interest rates is their primary method to achieve these objectives. If inflation rises sharply, rates increase to control it, which can strengthen the USD as global investors seek stability. If inflation dips or unemployment rises, the Fed might reduce rates to stimulate spending, potentially weakening the dollar.
The Fed holds eight meetings each year to review economic factors and decide on policy. These meetings involve twelve Federal Reserve officials, including seven Board members and the president of the New York Fed, along with four others from regional banks who rotate annually.
In challenging situations, the Federal Reserve may use quantitative easing (QE), a method for injecting credit into the financial system. This non-traditional policy tool is often deployed during crises, like the 2008 financial collapse. QE entails the Fed creating money to purchase high-quality bonds, which typically results in a depreciation of the dollar.
Quantitative tightening (QT) is the opposite of QE, where the Fed ceases purchasing bonds and refrains from reinvesting in maturing bonds. This typically supports the value of the US dollar.
