Federal Reserve Lowers Key Interest Rate, Citing Elevated Risks to Employment

FOMC cuts by 1/4 percentage point

WASHINGTON, D.C. — October 29, 2025

The Federal Reserve Board issued a Federal Open Market Committee (FOMC) statement today, announcing a decision to lower the target range for the federal funds rate. This move, effective immediately, reduces the range by 1/4 percentage point, setting the new target at 3-3/4 to 4 percent.

The Committee stated that the decision was made in support of its long-term goals and “in light of the shift in the balance of risks”. The Federal Reserve, which serves as the central bank of the United States, aims to provide the nation with a safe, flexible, and stable monetary and financial system.

Economic Conditions and Goals

In its assessment of current conditions, the FOMC noted that available indicators suggest economic activity has been expanding at a moderate pace. However, the labor market has shown signs of softening; job gains have slowed this year, and while the unemployment rate remained low through August, it has edged up. Inflation has moved up since earlier in the year and remains somewhat elevated.

The Committee continues to pursue its dual mandate: achieving maximum employment and inflation at the rate of 2 percent over the longer run.

Focus Shifts to Downside Risks

The Committee acknowledged that uncertainty about the economic outlook remains elevated. Importantly, the Committee judges that downside risks to employment rose in recent months. The FOMC is attentive to the risks to both sides of its dual mandate. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.

In addition to the rate cut, the Committee decided to conclude the reduction of its aggregate securities holdings on December 1.

Monetary Policy Outlook

Looking ahead, the Committee stated it would continue to monitor the implications of incoming information for the economic outlook. When considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.

The Committee is prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of its goals. These assessments will incorporate a wide range of information, including readings on labor market conditions, inflation pressures and expectations, and financial and international developments.

Committee Vote

The monetary policy action passed with a vote of 10-2. Voting for the action were Chair Jerome H. Powell, along with John C. Williams, Michael S. Barr, Michelle W. Bowman, Susan M. Collins, Lisa D. Cook, Austan D. Goolsbee, Philip N. Jefferson, Alberto G. Musalem, and Christopher J. Waller.

The dissenters were Stephen I. Miran, who preferred a larger reduction (1/2 percentage point) at this meeting, and Jeffrey R. Schmid, who preferred no change to the target range.