The U.S. Federal Reserve (Fed) on Wednesday announced its decision to lower the target range for the federal funds interest rate by 25 basis points to 3.5-3.75 percent. U.S. President Donald Trump said the cut could have been larger.
This marks the Fed's third rate cut this year and its sixth since September 2024.
The Federal Open Market Committee (FOMC), the Fed's policymaking body, said on Wednesday in a post-meeting statement that current indicators suggest economic activity has been expanding at a modest pace, job gains have slowed this year, the unemployment rate has edged up, and inflation has risen since the start of the year and remains elevated.
Data issued by Automatic Data Processing, Inc. (ADP) showed that U.S. private companies cut 32,000 workers in November, defying economists' expectations for an increase of 40,000 for the month.
Small businesses with fewer than 50 employees lost 120,000 jobs in November, while mid-sized and large establishments continued to add jobs in the period, according to the ADP.
Uncertainty about the economic outlook remains elevated, and downside risks to employment have increased in recent months. In light of the change in the risk balance, the Committee decided to lower the target range for the federal funds rate by 25 basis points.
Previously, Fed officials were divided over the impact of tariff policies on inflation and whether to cut rates further in December, but deteriorating U.S. jobs data heightened expectations for a rate cut.
At a press conference on Wednesday, Fed Chair Jerome Powell said the Fed has cut rates by 75 basis points across three meetings this year. This further normalization of policy stance will help stabilize the labor market while allowing inflation to resume its downward trend toward the 2 percent target once the effects of tariffs have passed through.
Powell also noted that U.S. tariff policies have contributed to higher inflation.
In response, Trump stated that economic growth does not mean inflation, and even if inflation occurs, it is acceptable as it can be slowed down. Trump also said the rate cut was too small and could have been larger.
The president has repeatedly criticized Powell publicly over Fed monetary policy.
After taking office again in January this year, Trump accused the Fed of cutting rates too slowly and threatened to replace Powell. This has sparked widespread concern over the Fed's ability to maintain its monetary policy independence.
Speaking about candidates for Fed Chair, Trump said he would meet that day with one candidate, former member of the Fed board of governors Kevin Warsh. Trump said he wants someone who is "honest about interest rates" and wishes rates could be "much lower".
He stated that U.S. rates should be the lowest in the world.
Additionally, another candidate for the position, Kevin Hassett, head of the White House National Economic Council, said on Wednesday that the Fed has ample room to cut rates and may need to cut further. Hassett stated that stronger economic data could support a 50-basis-point cut.
On the 25-basis-point cut, nine of the 12 FOMC members voted in favor, while three dissented. One member preferred a 50-basis-point cut, and the other two preferred to maintain the rate.
This is reportedly the first time since 2019 that so many dissenting votes have occurred.
Trump urges bigger move as US Fed makes 3rd interest rate cut
