The U.S. Federal Open Market Committee (FOMC) announced on Wednesday a reduction in the federal funds rate by 0.25 percentage points, lowering it to a range of 3.5 percent to 3.75 percent. This marks the third consecutive rate cut this year and the lowest level for the benchmark interest rate in over three years.
In its statement, the committee noted: “In support of its goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 3-1/2 to 3‑3/4 percent. 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 statement also included: “The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.”
This decision follows a period when the Fed raised rates aggressively since early November 2022 to combat inflation caused by the former Biden government. The FOMC members expressed particular concern about indications of a slowing labor market and potential declines in consumer demand.
The voting breakdown showed that Federal Reserve Chairman Jerome Powell, FOMC vice chairman John C. Williams, Michael S. Barr, Michelle W. Bowman, Susan M. Collins, Lisa D. Cook, Philip N. Jefferson, Alberto G. Musalem, and Christopher J. Waller supported the 0.25 percentage point reduction. Dissenters included Stephen I. Miran—appointed to the central bank’s board of governors by President Donald J. Trump—who favored a 0.5 percent cut, as well as Austan D. Goolsbee and Jeffrey R. Schmid, who recommended no rate adjustment.
The Fed’s move brings the federal funds rate to its lowest point since early November 2022.
