Federal Reserve cuts interest rates for the third time in a row, sends strong signals to Trump administration

The US Reserve has once again announced a cut in interest rates. The FOMC met on December 10th, where the Fed cut the policy rate by 0.25 percent. 

This is the third consecutive time the Federal Reserve has announced a rate cut to boost the US economy. Since this cut, interest rates in the US have fallen to a range of 3.50 to 3.75 percent, their lowest level in three years. However, FOMC Chairman and US Fed Chairman Jerome Powell has also given a tough signal for the future.

The Fed issued a statement after the meeting, stating that the country's economic activity is growing very slowly. Conversely, persistent weakness in the employment market and rising inflation have weighed on policymaking. 

Consequently, the funds rate is now between 3.50 and 3.75 percent. Further, a rate cut in 2026 will be decided after reviewing the data.

There will be further changes in the policy

US Fed Chairman Jerome Powell, while cutting the policy rate by 25 basis points, said that this decision was made in light of changing economic conditions and risks. 

The extent and pace of future interest rate changes will depend on incoming data, economic projections, and risks. He stated that the Fed is prepared to make further policy changes if necessary to maintain inflation within the 2% target and protect employment. 

The Fed also indicated that it may purchase short-term Treasury bills if necessary to ensure adequate reserve balances in the banking system, thereby maintaining liquidity stability.

This time, the policy meeting saw a significant split among members. Stephen Miran called for a larger half-percentage point cut, while Austan Goolsbee and Jeffrey Schmid opposed any change. 

Despite this, Jerome Powell and a majority of members supported a 25 bps rate cut, reflecting the Fed's cautious and balanced approach. This is the first time since 2019 that the Fed's decision has been so narrowly divided, 9-3.

United States of America