Federal Reserve Chair Jerome Powell announced a fresh quarter-point interest rate cut on December 10, 2025, lowering the federal funds rate to a target range of 3.50% to 3.75%. This marks the third rate reduction of the year as the central bank attempts to stabilize a slowing labor market while keeping pressure on still-elevated inflation.

“In support of our goals and in light of the balance of risks to employment and inflation, today the Federal Open Market Committee decided to lower our policy interest rate by a quarter percentage point,” Powell stated, emphasizing that the committee remains focused on guiding inflation back to its 2 percent target without tipping the economy into recession.

The decision, outlined in the FOMC’s latest statement, revealed deeper divisions within the committee. Updated projections show policymakers expect just one more rate cut in 2026—far fewer than financial markets had anticipated—signaling that the Fed may be preparing for a pause in easing despite recent economic softness.

Federal data continues to present a mixed picture. The Bureau of Labor Statistics recently reported a 4.2 percent unemployment rate, reflecting cooling job growth compared to earlier in the year. Meanwhile, inflation, though down from its peak, remains above the Fed’s long-term goal, complicating Powell’s attempt to balance the risks of undercutting employment against waiting too long to act against persistent price pressures.

The rate cut is expected to provide modest relief for borrowers while keeping borrowing costs high enough to prevent a rebound in inflation. Economists note that the Fed’s cautious tone reflects concerns that aggressive easing could reignite price increases at a moment when consumer confidence and business investment remain fragile.

With a divided committee, uncertain inflation trajectories, and political scrutiny rising as the election season approaches, Powell’s announcement underscores the challenge the Federal Reserve faces: sustaining economic momentum while preserving credibility on inflation. For now, the central bank appears committed to a slow, measured path—one quarter-point at a time.