Fed cuts rates for third time ahead of Christmas holiday

(The Center Square) – The Federal Reserve on Wednesday again cut interest rates, just ahead of the Christmas holiday.

In a 10-3 vote, the central bank lowered its benchmark lending rate by another quarter percentage point, bringing target rates to 3.5% to 3.75%. Wednesday was the Fed's third consecutive rate cut since September, which marked the beginning of the first cutting cycle since December 2024. For eight months, the Fed held rates steady at 4.25% to 4.5%; at the Federal Open Market Committee's last three meetings, it has lowered rates by 0.25% each time.

Federal Reserve Chair Jerome Powell said at an economic symposium in August that the central bank weighs multiple economic considerations in its decisions to raise, lower or leave rates unchanged. Lowering rates can stimulate the job market, but it can also spark inflation. Inflation continues to be slightly higher than the Fed's target of 2% (it's currently sitting at about 3%), but the labor market has also seen modest and uneven growth.

The Fed's statement on its decision Wednesday indicated that the economy hasn't changed dramatically since Powell's late summer remarks – or since the body's recent rate decisions.

"Available indicators suggest that economic activity has been expanding at a moderate pace. Job gains have slowed this year, and the unemployment rate has edged up through September. More recent indicators are consistent with these developments. Inflation has moved up since earlier in the year and remains somewhat elevated," wrote the committee.

"The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated," the committee added.

President Donald Trump has repeatedly pushed the Fed to lower interest rates since regaining office, frequently voicing his displeasure with Powell. Trump has argued that the economy would be much stronger if the Fed had acted sooner and less cautiously and has said he looks forward to replacing Powell when his term ends in May.

Of the three board members who voted against the 0.25% cut, one voted for a 0.5% rate reduction, and two voted for no change.