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U.S. Fed cuts key interest rate for 3rd straight time amid economic uncertainties

Published: 11 Dec. 2025, 08:37

Federal Reserve Chair Jerome Powell attends a press conference at the Federal Reserve in Washington on Dec. 10. [EPA/YONHAP]

The U.S. Federal Reserve on Wednesday lowered its benchmark interest rate by a quarter percentage point for the third straight time, as policymakers were divided over the decision amid a weakening labor market and stubborn inflation.

Following the two-day Federal Open Market Committee (FOMC) meeting, the central bank decided to lower the key rate to the 3.5-3.75 percent range. The third reduction since September has put the gap between the key rates of Korea and the United States at up to 1.25 percentage points.

During a press conference, Fed Chairman Jerome Powell said that the rate adjustments since September have brought the central bank's monetary policy "within a broad range of estimates of its neutral value" — a level that neither stimulates the economy nor slows it down.

He also repeated the new language in the latest Fed statement that the central bank is well positioned to determine the "extent and timing" of additional adjustments — an expression that raised speculation that it could pause cuts for the time being.

"That new language points out that we'll carefully evaluate that incoming data," Powell said.

According to FOMC members' new median economic projection, the federal funds rate is expected to be cut to 3.4 percent at the end of next year — the same as the September forecast, signaling the possibility of one more quarter-percentage point reduction in 2026.

U.S. gross domestic product is expected to grow by 1.7 percent this year, up from 1.6 percent projected in September, and by 2.3 percent next year, up from the previous forecast of 1.8 percent, according to the median projection.

Federal Reserve Chair Jerome Powell leaves a news conference at the Federal Reserve in Washington on Dec. 10. [AP/YONHAP]

Personal Consumption Expenditures (PCE) inflation is projected to reach 2.9 percent at the end of the year, down from the September projection of 3.0 percent, and 2.4 percent at the end of next year, down from 2.6 percent projected in September.

PCE is a measure of household consumer spending on goods and services in the United States.

Fed policymakers were split over the rate decision, with some against the reduction due to inflation well above the central bank's 2 percent target, and others favoring it to shore up a weakening labor market. The decision was also complicated by delays in the release of economic data due to the government shutdown.

Among the policymakers at the committee, Stephen Miran called for a half percentage point reduction, while Austan Goolsbee and Jeffrey Schmid preferred to hold the rate steady. Others, including Fed Chair Jerome Powell, voted for the latest monetary action.

Yonhap