Federal Reserve cuts interest rates for second time this year

The Federal Reserve cut its benchmark interest rate by a quarter-point on Wednesday for the second time this year, bringing the federal rate range to 3.75%–4%. The decision aims to boost economic activity amid a sluggish labor market and persistent inflation. The rate reduction, albeit small, will provide relief to small to mid-size businesses through lower borrowing costs.

In its official statement, the Fed highlighted that while economic activity has expanded modestly, job creation has slowed, unemployment has risen slightly and inflation remains persistent.

The central bank typically lowers rates to stimulate economic activity when the labor market slows and raises rates when inflation spikes. Balancing these dual objectives continues to challenge policymakers.

During a press conference following the announcement, Fed Chair Jerome Powell said there is “no risk-free path for policy” when setting rates. He added that he does not anticipate the labor market weakening further.

Inflation has risen since earlier this year and remains above the Fed’s target. Last week, the Bureau of Labor Statistics reported that inflation increased from 2.9% to 3% in September, a full percentage point above the Fed’s target.

Unemployment remained at a historically low level of 4.3% in August. However, it’s taking job seekers longer—about six months on average—to land new opportunities due to a sharp decline in hiring.

The Fed’s task is further complicated by the government shutdown, now in its fourth week. The Bureau of Labor Statistics’ last update was on Oct. 24, 2025, and it can’t provide updated data until the Federal government resumes operations. The lack of updated data will make it harder for the Fed to monitor trends accurately.

The next rate decision is scheduled for Dec. 10. However, Fed Chair Jerome Powell revealed that the Board remains divided, with “strongly differing views” on future policy direction.