DECEMBER 15, 2025 – – INTEREST RATES REDUCED BY 25 BPS
The FOMC brought interest rates down by 25 basis points at their final meeting of 2025. The benchmark rate is between 3.5 percent and 3.75 percent. The decision to reduce rates was widely expected, however, the decision was not unanimous. The vote to bring rates down by a quarter of a percent came in at 9-3. Two members voted against changing the rate, citing the stubborn inflation data, while one member thought a larger reduction was warranted given the slowdown in the job market.
The Fed wants to reduce interest rates down to neutral levels, without causing inflation to become entrenched. Yet hiring has slowed significantly, edging the unemployment level higher while eroding consumer confidence.
Fed Chair Powell downplayed the dissent among the members, saying they all agree on the challenges, but differ on the way to solve them. The lack of data due to the government shutdown in October and November hindered decision making. The Fed remains optimistic; they believe inflation for 2026 will fall to 2.4 percent from the current 2.9 percent. 2026 GDP is expected to rise to 2.3 percent from 1.7 percent.
Looking toward the future, the Federal Reserve signaled rates are not expected to move for several months.