The Federal Reserve cuts interest rates, potentially for the final time
- Alexangel Ventura
- 5 days ago
- 2 min read
On December 10th, the central bank of the United States, the Federal Reserve, decided to cut interest rates yet again, but with some major caveats.
Wednesday afternoon, after several days of meeting, the Federal Reserve's Federal Open Market Committee (FOMC) decided to cut its benchmark, federal funds rate by 25 basis points, dropping the target range to 3.5%-3.75% from the previous 3.75%-4.0%. This is set to be the third rate cut of 2025, following two initiated during the fall. The decision was contentious, with Stephen Miran supporting a bulk 50 basis points cut while Autan Goolsbee and Jeffrey Schmid outright refused to support cutting interest rates entirely.
Almost immediately, markets rose despite having previously stagnated, with the Dow Jones Industrial Average surpassing 1% gains by the end of the day. Precious metals surged in value while crypto fell due to fears of a weakened U.S. dollar with lower rates.
The cut showed the Federal Reserve's stronger emphasis on the weakening labor market over slowly creeping inflation hikes. Due to the implementation of tariff policies on many major trading partners with the United States, prices have gradually increased (inflation still above 2% target from Fed), though by not enough to persuade the Federal Reserve to outright neglect the even more pressing job crisis, as the national unemployment rate ticks higher, and companies pursue AI or tariff-related layoffs.
This decision was described my many as a "hawkish cut," including experts like former Fed Vice Chair and now Princeton economist Alan Blinder ahead of the meeting. Inevitably, the Fed hinted at continued economic uncertainty despite the seemingly resolute determination reached by the FOMC today. "Maximum employment and returning inflation to its 2 percent objective," noted the Federal Reserve's official policy statement. "Uncertainty about the economic outlook remains elevated."
In the short-term, borrowers will benefit with eventually reduced borrowing costs, though this different would vary based on longer-term rate policies and bank pricing. While the Fed did hint at one more rate cut for 2026, they did not express enthusiasm for another afterwards, as uncertainty remains over how price levels would react.
Inflation being such a neglected issue has further prompted the Federal Reserve to prevent heavy rate cuts, which is part of the rationale for why today's cut was virtually the bare minimum for such - 25 basis points.
