The Federal Reserve on Wednesday cut its benchmark interest rate by 0.25 percentage points, bringing the federal funds rate to its lowest level in more than three years.
The reduction lowers the federal funds rate to between 3.5% and 3.75%, down from its prior range of 3.75% to 4%.
The Fed’s decision marks the third consecutive rate cut since September, lowering the federal funds rate by a total of 0.75 percentage points this year.
Despite the lack of key government economic data because of the recent U.S. government shutdown, the Fed has been closely monitoring the slowdown in monthly job growth as well as rising inflation. Figures from ADP, which tracks private payrolls, showed that employers shed 32,000 jobs in November, a signal of continuing headwinds in the labor market.
“Employment growth remains slow, and inflation data seems reasonable given the previous concerns over tariffs and policy uncertainty,” Gary Pzegeo, co-CIO of CIBC Private Wealth US, said in an email before the Fed’s rate decision. “The Fed has highlighted the risk and unusual nature of today’s labor market, and would likely tilt toward supporting growth rather than fighting inflation.”
The move lowers the federal funds rate to its lowest level since early November 2022, when policymakers lifted the range to 3.75% to 4%. At that time, the central bank was boosting rates, its most potent tool for curbing inflation as inflation surged during the pandemic.
