Fed Trims Key Rate To 3.75 %–4.00 %

The US Federal Reserve, led by Chair Jerome Powell, has reduced its benchmark interest rate by 25 basis points, setting the new target range at 3.75%–4.00%. The decision was announced after the central bank’s two-day policy meeting concluded on 29 October 2025.

According to the Federal Open Market Committee (FOMC), the move reflects a shift in the balance of risks within the US economy. In its official statement, the Committee said that, “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 one-quarter percentage point to 3-3/4 to 4 percent.”

The October decision marks the second consecutive rate cut this year, following the reduction announced in September that lowered rates to 4.00%–4.25%. Together, the two cuts represent the Fed’s strongest signal yet that it is prioritising growth support amid signs of a cooling labour market.

Economic indicators suggest that activity in the US remains moderate but uneven. While job gains have slowed, unemployment has risen slightly though it remains historically low. Inflation, meanwhile, edged higher to 3% in September 2025 from 2.9% in August, staying above the Fed’s 2% target.

The central bank’s latest statement also confirmed that it will end the reduction of its securities holdings on 1 December, a step designed to ease financial conditions further. However, policymakers have stopped short of committing to additional rate cuts, noting that future decisions will depend on incoming data, labour market conditions, and inflation expectations.

The Fed reiterated its twin objectives of maximum employment and price stability, underscoring that uncertainty around the economic outlook remains high. It also acknowledged that downside risks to employment have increased in recent months, prompting a recalibration of policy to sustain growth momentum.

While the latest move is aimed at cushioning the economy, analysts caution that persistent inflation and global headwinds could limit the central bank’s ability to extend the easing cycle. For now, markets will closely watch upcoming data and Powell’s future statements for any indication of the next policy turn.