On December 10, 2025, the Federal Reserve announced a reduction in its benchmark federal funds rate by 25 basis points, bringing the target range to 3.5% to 3.75%. This decision represents the third consecutive month of rate cuts, aimed at addressing the dual challenges of rising inflation and a labor market that has shown signs of slowing. Fed Chair Jerome Powell acknowledged the complexities of navigating these economic conditions, stating that there are no risk-free options available for the central bank.

The interest rate cut is expected to lower borrowing costs for consumers, particularly those with mortgages, credit card debt, or personal loans, and may also facilitate cheaper borrowing for businesses. However, the decision was met with internal dissent within the Federal Open Market Committee, which voted 9-3 against the cut. Notably, Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeff Schmid opposed the reduction, while Fed governor Stephen Miran advocated for a more substantial cut of half a point. This level of disagreement marks the highest since September 2019.

In conjunction with the interest rate announcement, the Fed released economic projections indicating an expected growth rate of 2.4% for the following year, an increase from previous estimates. Officials also forecasted another interest rate cut in 2026 and a further reduction in 2027, with inflation anticipated to decline to 2.4% next year. Despite these measures, the overall economic outlook remains uncertain, compounded by a recent federal government shutdown that has led to a data blackout.

Reports indicate that job gains have slowed, with the unemployment rate increasing slightly to approximately 4.4%. The payroll processor ADP reported a loss of 120,000 jobs in small businesses for November, reflecting a broader trend of weakening in the labor market. The Federal Reserve's actions suggest a prioritization of labor market stability over inflation concerns, as the committee aims to achieve maximum employment while maintaining inflation at a long-term rate of 2%. The implications of these interest rate changes may significantly affect access to credit and financial stability, particularly for marginalized demographic groups.