US Fed cuts interest rates by 25bps

December 11, 2025 (MLN):  The U.S Federal Reserve has lowered its benchmark interest rate by 25 basis point, this brought the federal funds rate to a range of 3.5% to 3.75%, a more cautious approach as economic growth moderates and inflation remains elevated.

The move reflects the central bank’s effort to support the economy while balancing risks to employment and prices.

Economic activity in the United States has continued to expand at a moderate pace, but the labor market has shown signs of softening, with job gains slowing this year and the unemployment rate edging higher through September, according to the FOMC statement issued by the Federal Reserve.

At the same time, inflation has risen since earlier in the year and continues to exceed the Fed’s 2% long-term target, which has prompt policymakers to remain attentive to price pressures.

The Federal Open Market Committee (FOMC) emphasized that uncertainty about the economic outlook remains high, particularly regarding downside risks to employment, and reiterated its commitment to achieving maximum employment and returning inflation to its target.

As part of the broader policy adjustments, the Fed also highlighted changes to several key tools.

The interest rate on reserve balances will drop to 3.65%, and the primary credit rate will decrease to 3.75%.

The central bank plans to maintain ample liquidity in the banking system through purchases of short-term Treasury securities and will continue rolling over principal payments from existing holdings to ensure sufficient reserves.

The statement stressed that the stance of monetary policy will be guided by incoming economic data, labor market developments, inflation trends, and financial conditions, with the flexibility to respond if risks emerge that could impede the Fed’s goals.

While the majority of FOMC members supported the quarter-point reduction, three officials expressed different preferences: one called for a larger half-point cut, while two others favored keeping rates unchanged.

This highlights ongoing debates within the committee about the appropriate pace of policy adjustments in the current economic environment.

The Fed’s latest action emphasized its careful balancing act: supporting economic growth and employment while ensuring that inflation moves back toward the 2% target.

Policymakers signaled that future rate adjustments will depend on evolving economic conditions, incoming data, and potential risks to the economy, reaffirming the Fed’s readiness to act to sustain economic stability.

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