Fed Cuts Rate By 25 Basis Points, In Line With Expectations

• The rate reduction comes at a time when inflation hasn’t shown any signs of a significant rise.
• President Donald Trump’s pick, Governor Stephen Miran, voted for a 50 bps cut once again.
• Kansas City Fed President Jeff Schmid voted to keep the policy rate unchanged.

The Federal Reserve on Wednesday cut the key borrowing rate by 25 basis points, bringing down the federal funds rate to the 3.75% to 4% range, in line with market expectations.

This is the second rate cut announced by the Fed in 2025, after a similar 25 bps cut in September.

The rate reduction comes at a time when inflation hasn’t shown any signs of a significant rise. According to data from the Bureau of Labor Statistics (BLS), the annual inflation rate stood at 3% in September, lower than the Wall Street consensus of 3.1%.

Moderating Economic Activity

The Federal Open Market Committee (FOMC) highlighted that economic activity has been expanding at a moderate pace. It also touched upon the weakness in the labor market, stating that “job gains have slowed” while noting that the unemployment rate has “edged up.”

“Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months,” the FOMC said.

Miran Votes For A Bigger Cut

The FOMC voted 10-to-2 to cut rates by 25 bps, with President Donald Trump’s pick, Governor Stephen Miran, voting for a 50 bps cut once again, after a similar vote in the September meeting. Kansas City Fed President Jeff Schmid voted to keep the policy rate unchanged.

Meanwhile, U.S. equities rose in Wednesday’s afternoon trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was up 0.08%, the Invesco QQQ Trust ETF (QQQ) gained 0.27%, while the SPDR Dow Jones Industrial Average ETF Trust (DIA) rose 0.21%. Retail sentiment around the S&P 500 ETF on Stocktwits was in the ‘neutral’ territory.

The iShares 7-10 Year Treasury Bond ETF (IEF) was down 0.25% at the time of writing.

Also See: El-Erian Says AI Is Like Electricity, Warns There Are Some Names That Will ‘End Up In Tears’: Report

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