The Federal Open Market Committee decided on Wednesday, October 29, to reduce its policy interest rate by one-quarter of a percentage point. Since its September meeting, inflation and employment have remained steady.
The goals of the Federal Reserve are to achieve maximum employment and maintain steady prices. Many people rely on their jobs at the federal government and are struggling. The unemployment rate already climbed to 4.3% in August before the government shutdown. Between furloughs and layoffs, the shutdown will undoubtedly affect the unemployment rate. As of the latest report, 7.3 million Americans are unemployed. Meanwhile, inflation has remained elevated but steady around 2.7%–3.0%. This is a great improvement since 2022, but it is still above the Federal Reserve goal of 2%.
The federal funds interest rate is now 3.75% to 4%, down from 4% to 4.25%, and Chair Powell said “there were strongly differing views about how to proceed in December.” As the committee tries to balance the risks of rising inflation and low employment, data lags due to the government shutdown make this decision difficult. Economic indicators have shown slow but steady growth, as GDP rose 1.6% for the first half of 2025. Although GDP has continued to grow, the housing market weighs heavily on the minds of Americans with prices remaining high.
With two interest rate cuts in 2025, Americans are hoping the effects will reach them eventually through the lower mortgage rates, credit card interest, and auto loans. While the rate cut does not affect these directly, it may indirectly influence the broader interest rates that reach Americans.
Bottom Line
While another rate cut in December is not a “foregone conclusion,” the Federal Open Market Committee must balance risks and make decisions for Americans in the face of data lags and the government shutdown. It seems doubtful as of now that we will get a third rate cut this year.