Federal Reserve Lowers Interest Rates to Support Economy
On October 29, 2025, the Federal Reserve announced a reduction of its benchmark interest rate, marking the lowest level in three years. The rate was cut by 0.25 percentage points, bringing the target range down to 3.75%–4.00%.
This decision, revealed during a news conference, represents the second rate cut for 2025, as officials aim to stimulate economic growth amid a slowdown in consumer spending.
Although officials anticipated additional cuts in both October and December, Federal Reserve Chair Jerome Powell noted that the ongoing government shutdown, which has affected economic data, could hinder that plan from materializing.
“There is no risk-free path for policy,” Powell mentioned, acknowledging a “tension” between employment goals and the target inflation rate of 2%. He further observed that opinions on how to proceed in December are quite divided.
“A further reduction in the policy rate at the December meeting is not a foregone conclusion. Far from it. Policy is not on a preset course,” he added. “We haven’t made a decision about December; we’ll be examining available data and its impacts on the outlook and risk balance.”
Interestingly, newly-appointed Governor Stephen Miran disagreed with the majority’s decision to cut rates, suggesting instead a reduction of 0.50 percentage points. Another dissenting voice was Jeffrey Schmid, the president of the Kansas City Federal Reserve, who preferred to keep borrowing costs unchanged.
“What do you do if you are driving in the fog? You slow down,” Schmid remarked, emphasizing caution.
Powell also shared that privately collected data indicates little overall change in the economy.
“Mortgage rates are more tied to the 10-year [Treasury yield] versus the Fed Funds Rate,” noted Stephanie from Hightower Advisors. “That being said, a lower Fed Funds rate should be viewed as a positive sign and potential stimulus for the economy.”
Meanwhile, at a summit in South Korea, President Donald Trump criticized Powell, dubbing him “Jerome ‘Too Late’ Powell” for the slow pace of the rate cuts. Following Powell’s cautious approach regarding a potential December cut, U.S. markets reacted with the Dow falling by about 74 points (-0.16%), while the S&P 500 dipped slightly and the Nasdaq managed a rise of approximately 0.55%.
In the bond market, the 10-year Treasury yield increased to around 4.00% as investors adjusted their expectations for further cuts.
“Given the potentially contentious tone behind the scenes regarding the December decision, it will be important to observe developments as the quiet period has ended and committee members begin to speak publicly,” said Jay Woods, chief market strategist at Freedom Capital Markets.
