Update: Fed Cuts Rate by 25 Basis Points Amid Labor Market Worries, Maintains Policy View Through 2028

03:14 PM EST, 12/10/2025 (MT Newswires) -- (Updates with the Summary of Economic Projections and comments from Oxford Economics.)

The Federal Reserve reduced its benchmark lending rate by 25 basis points Wednesday amid continued concerns about the health of the labor market, while policymakers reiterated their median rate expectations through 2028.

The central bank's Federal Open Market Committee lowered interest rates to a range of 3.50% to 3.75%, in line with Wall Street's expectations and marking a third straight quarter-percentage-point cut.

"Job gains have slowed this year, and the unemployment rate has edged up through September," the FOMC said Wednesday following its two-day meeting. "More recent indicators are consistent with these developments."

The latest remarks echoed those made in late October, though the FOMC said at the time that the unemployment rate remained "low" through August despite going up.

Three FOMC members dissented from the majority, with Governor Stephen Miran preferring a 50-basis-point reduction and Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeffrey Schmid voting in favor of a no-change stance, according to the Fed statement.

The committee's Summary of Economic Projections continued to show the median federal funds rate at 3.4% at the end of 2026, unchanged from September. The 2027 and 2028 rate outlooks were also maintained at 3.1% each.

"We expect the Fed will want to pause for a while to allow time for this and prior cuts to feed through the economy," Oxford Economics Chief Global Economist Ryan Sweet said in remarks e-mailed to MT Newswires.

Policymakers raised their annual economic growth views through 2028. They now see 2026 gross domestic product growth at 2.3%, up from a 1.8% rate projected in September. The outlooks were upgraded to 2% from 1.9% for 2027 and to 1.9% from 1.8% for 2028.

The unemployment rate next year is still seen at 4.4%, though the 2027 outlook was lowered to 4.2% from 4.3%. Policymakers reduced their views for the 2026 personal consumption expenditures inflation to 2.4% from 2.6%, while the core inflation measure was cut to 2.5% from 2.6%.

"Rate cuts are unlikely to significantly boost the hiring rate, which is being depressed by over-hiring, solid productivity growth, policy uncertainty, a rise in people with multiple jobs, and less immigration," Sweet wrote.

Heading into the meeting, there were signs of a growing divide among FOMC members regarding the policy path ahead amid concerns about high inflation and labor market weakness. A 43-day-long record US federal government shutdown that ended last month has delayed key economic reports, impacting the central bank's data-dependent stance.

Last week, data released by global outplacement firm Challenger Gray & Christmas showed job cuts in the US surpassed 1.1 million in the year through November, reaching their highest year-to-date total since 2020. Payroll processing firm ADP (ADP) data showed employment in the US private sector surprisingly fell last month.

The Bureau of Labor Statistics won't publish October employment data that was delayed due to the shutdown. The November jobs report is scheduled for release next week.

The Fed reiterated its views about the economy Wednesday, saying economic activity has been expanding at a "moderate" rate and inflation continues to be somewhat elevated.

"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 FOMC said.

The FOMC's next meeting is scheduled for Jan. 27-28.

Price: 259.01, Change: +0.78, Percent Change: +0.30

MT Newswires does not provide investment advice. Unauthorized reproduction is strictly prohibited.