Fed Reduces Interest Rates Again by a Quarter Point Amid Economic Slowdown and Shifts in Policy

The Federal Reserve has approved another interest rate cut, lowering its benchmark borrowing rate by 0.25% to a target range of 4.50% to 4.75%, marking its second consecutive reduction. This decision, aimed at moderating economic conditions, comes just days after the U.S. presidential election, adding a layer of political significance to the Fed's timing.

This move, anticipated by markets, follows a previous half-point rate cut in September and reflects the Fed’s ongoing efforts to recalibrate monetary policy. Fed Chair Jerome Powell described the adjustments as part of a plan to achieve a “soft landing” for the economy, aiming to manage inflation while supporting the job market. Economic figures suggest that inflation is trending down toward the Fed’s 2% goal, while the labor market shows mixed signals with a slight uptick in unemployment to 4.1%.

In its latest statement, the Fed noted a shift in its assessment, stating that the risks between job market deterioration and inflation resurgence are now “roughly balanced.” Powell emphasized that lowering rates too aggressively could reignite inflationary pressures. In contrast, labor market data has weakened slightly, with fewer job openings and a rise in ongoing unemployment claims, indicating that the market is cooling but remains stable.

The timing of this rate cut follows Donald Trump’s recent election victory. During his previous term, Trump frequently criticized the Fed’s rate policies. With his return to office, economists are speculating on potential shifts in the Fed’s approach if Trump pursues policies that could impact inflation, such as tariffs or changes in immigration policy. Powell’s term as chair expires in early 2026, leaving questions about how future political dynamics might influence Fed policies.

With further economic data still pending, the Fed may implement another quarter-point cut by December, potentially followed by a pause in January as it assesses the impact of its recent adjustments. Current projections from the September “dot plot” suggest that Fed officials expect additional rate cuts through 2026, ultimately reaching a “terminal rate” of approximately 2.9% if inflation continues its downward trend.

Even with these reductions, borrowing costs for consumers, including mortgages and credit card rates, remain high, with mortgage rates for 30-year loans reaching 6.8%. As the Fed navigates between managing inflation and supporting employment, the path forward will remain under close watch by economists and policymakers alike.