Federal Reserve Lowers Interest Rate Amid Economic Uncertainty

On October 29, 2025, the Federal Reserve announced a reduction in the target range for the federal funds rate by 0.25 percentage points, lowering it to a range of 3-3/4 to 4-1/4 percent. This decision comes as economic activity shows signs of moderation, with job gains slowing and the unemployment rate slightly increasing, although it remains low.

In its statement, the Federal Open Market Committee (FOMC) indicated that available indicators suggested a moderation in economic activity during the first half of the year. The Committee noted that inflation has also risen since earlier in 2025 and remains somewhat elevated. The FOMC aims to achieve maximum employment while maintaining inflation at a target rate of 2 percent over the longer term.

Economic Outlook and Risks

The FOMC’s statement highlighted ongoing uncertainty regarding the economic outlook, noting that risks affecting both sides of its dual mandate have increased. In particular, the Committee observed a rise in downside risks to employment in recent months. In light of these concerns, the decision to adjust the target range for the federal funds rate signals a proactive approach to support economic growth.

The Committee emphasized its commitment to monitoring incoming data and the evolving economic landscape. It intends to assess the implications of various factors, including labor market conditions, inflation pressures, and international developments, when determining future monetary policy actions.

Decisions and Voting

In addition to the interest rate change, the FOMC plans to conclude the reduction of its holdings of Treasury securities and agency mortgage-backed securities by December 1, 2025. This strategy reflects the Committee’s focus on achieving its objectives related to employment and inflation.

The voting members of the Committee included Jerome H. Powell, Chair; John C. Williams, Vice Chair; and others. Notably, Stephen I. Miran voted against the action, expressing a preference for a 0.5 percentage point reduction, while Jeffrey R. Schmid favored maintaining the current target range.

As the Federal Reserve navigates these economic challenges, its decisions will continue to be shaped by a careful evaluation of various economic indicators, demonstrating a commitment to adapting policies in response to changing conditions.