FOMC Meeting: Federal Reserve Lowers Interest Rates by 25 Bps in Second Cut of the Year

The U.S. Federal Reserve has announced it has lowered the interest rate by another 25 basis points (bps). This marks the second cut of the year, with many experts still calling for one more before the year ends.

Fed Confirms Second Rate Cut of 2025

In a recent press release, the committee announced it will lower the federal funds rate from a range of 4.0–4.25% to 3.75–4%. This decision comes after the two-day-long FOMC meeting, with markets already expecting the 25bps cut.

This latest cut follows the September decision, when the Fed also reduced rates by 25 bps.

The Fed’s statement says that almost all committee members voted in favor of the decision, with Stephen Miran opposing it because he wanted a larger 50bps cut, and Jeffrey R. Schmid supporting no rate cut. Analysts see this as a signal that policymakers are trying to support growth while keeping an eye on inflation as Powell’s tenure comes to an end.

This follows the Bureau of Labor Statistics’ announcement that U.S. inflation for September was 3% year-over-year (YoY), marginally below the 3.1% forecast. This indicates that although inflationary pressures are decreasing, they remain above the Fed’s long-term 2% target.

This could be among Jerome Powell’s last major policy moves as FOMC chair. U.S. Treasury Secretary Scott Bessent confirmed a shortlist of five candidates being considered by President Donald Trump to replace Powell, whose term is set to expire at the end of the year. The decision, expected in December, will likely influence the Fed’s direction heading into 2026.

Trump’s administration has previously pushed for more aggressive rate cuts to stimulate economic growth.

Economic Shifts Despite U.S. Government Shutdown Tensions

The FOMC meeting also took place under the shadow of an ongoing government shutdown, now the second-longest in U.S. history. Economists warn that each week of closure could shave 0.1% off GDP growth, according to JPMorgan estimates. 

Experts worry that a prolonged fiscal disruption could undermine the recovery, given the unemployment of federal employees and the strain on social programs such as food aid.

Senate efforts to pass a Republican-backed funding bill have repeatedly failed, heightening uncertainty ahead of the next fiscal deadline. Vice President JD Vance’s assurance that the administration will continue paying military personnel has done little to calm broader concerns about the economy’s resilience.

Meanwhile, Polymarket data indicates that nearly 89% of traders expect one additional cut before year-end. 

Bitcoin and equity markets have reacted modestly. This suggests investors are waiting for Powell’s post-meeting remarks to gauge whether the easing cycle will continue into December.