PULSE POINTS

❓WHAT HAPPENED: The Federal Reserve reduced its benchmark interest rate by 0.25 percentage points, marking the third consecutive rate cut this year.

👤WHO WAS INVOLVED: The Federal Reserve and its policymakers.

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📍WHEN & WHERE: The rate cut was announced on Wednesday, bringing the federal funds rate to its lowest level in over three years.

💬KEY QUOTE: “In support of its goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 3-1/2 to 3‑3/4 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.” — Federal Reserve

🎯IMPACT: The decision aims to spur hiring and economic growth by lowering borrowing costs for businesses and consumers.

On Wednesday, the Federal Reserve‘s Federal Open Market Committee (FOMC) announced a reduction in its benchmark interest rate by 0.25 percentage points. This adjustment lowers the federal funds rate to a range of 3.5 percent to 3.75 percent, marking the lowest level in over three years. It is the third consecutive rate cut since September, with a total reduction of 0.75 percentage points this year.

“In support of its goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 3-1/2 to 3‑3/4 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks,” the December FOMC meeting statement reads, adding: “The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.”

The FOMC members appear to be especially concerned about indications of a slowing labor market and a potential decline in consumer demand. Notably, the committee members in favor of the 0.25 percent cut were Federal Reserve Chairman Jerome Powell, FOMC vice chairman John C. Williams, Michael S. Barr, Michelle W. Bowman, Susan M. Collins, Lisa D. Cook, Philip N. Jefferson, Alberto G. Musalem, and Christopher J. Waller. Meanwhile, dissenters included Stephen I. Miran—appointed to the central bank’s board of governors by President Donald J. Trump—who favored a 0.5 percent cut, as well as Austan D. Goolsbee and Jeffrey R. Schmid, who favored no reduction in the benchmark interest rate.

This rate cut brings the federal funds rate to its lowest point since early November 2022, when the central bank had aggressively raised rates to combat inflation caused by the former Biden government.

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