Federal Reserve Cuts Interest Rate Again to Stimulate Economy

On October 29, 2025, the Federal Reserve announced a 0.25 percentage point reduction in its benchmark interest rate, lowering the target range to 3.75%–4.00%, effective October 30. This marks the second consecutive rate cut this year, following a similar reduction in September, as the central bank aims to stimulate economic growth amid signs of a slowing labor market and persistent inflationary pressures.

The Federal Open Market Committee (FOMC) stated that the decision reflects concerns over recent economic indicators suggesting a deceleration in job gains and an uptick in the unemployment rate. Inflation remains above the 2% target, prompting the Fed to take action to support economic growth.

Federal Reserve Chair Jerome Powell emphasized the uncertainty surrounding future rate cuts, stating that a December cut is "far from" certain. He highlighted the need for a cautious approach, balancing the risks of inflation and unemployment.

In response to the rate cut, U.S. stock indexes showed mixed reactions. The S&P 500 closed nearly flat, the Dow Jones Industrial Average dipped 0.2%, and the Nasdaq Composite rose 0.5%. Additionally, the 30-year fixed-rate U.S. mortgage decreased to 6.30%, the lowest level in 13 months, following the rate cut.

This rate cut follows a similar 0.25 percentage point reduction in September 2025, which was the first rate adjustment since December 2024. The consecutive cuts indicate the Federal Reserve's proactive approach to addressing economic challenges.

The Federal Reserve's recent actions reflect a strategic pivot in monetary policy, balancing the need to support a softening labor market against the backdrop of inflation that remains above the 2% target. This move has elicited mixed reactions from financial markets and raises questions about the future trajectory of U.S. economic policy.

As the Federal Reserve continues to monitor economic indicators, future policy decisions will depend on the evolving balance between inflationary pressures and labor market dynamics. The central bank remains committed to its dual mandate of promoting maximum employment and stable prices.