The Federal Reserve announced on December 10, 2025, about the third interest rate cut this year, but made it clear: the path ahead for any new cuts will be harder.
What happened?
The vote was 9-3 in favor of a cut of 25 basis points.
The interest rate is currently between 3.5% and 3.75%.
The bank also announced it would buy Treasury bonds worth $40 billion as a start.
Inside the meeting
Some people see that inflation is still above the target (2%), so caution is necessary.
And some other people focused on supporting the labor market amid economic concerns.
The dot plot indicates: one cut in 2026, and another cut in 2027.
Policy is entering the picture
The decision came amid presidential pressures wanting a faster cut for growth.
The Federal Reserve responded: "We will lower it now, but we won't follow the pace the White House wants."
This shows the difficult balance between the independence of the central bank and policy.
The impact of the decision
The cut encourages borrowing and investment, but it could increase inflation.
The markets welcomed it, but cautiously, because the Fed hinted that the pace would be slower.
Buying bonds will increase liquidity and ease pressure on banks and companies.
The big picture
This is the third time in 2025 (after September and October).
Inflation is still above the target, and unemployment is not falling as required.
The Fed is now in a delicate position: respond to policy or maintain its independence?
The summary
The Fed made it clear: "The cut is there, but not indefinitely or quickly." This decision reveals the tension between independent monetary policy and presidential pressures, and opens a significant debate about the future of the American economy in 2026.
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