US Fed trims key rate by 25 bps, taking it to lowest level since 2022

The United States Federal Reserve cut its benchmark interest rate by 0.25 percentage points, bringing the federal funds rate to its lowest level in more than three years. as per CBS report, the new target range now stands between 3.5 per cent and 3.75 per cent, down from 3.75 per cent to 4 per cent. This marks the Fed's third consecutive rate cut since September, reducing the rate by a total of 0.75 percentage points this year. CBS News noted that although key government economic data has been delayed due to the recent US government shutdown, the Fed has been closely tracking weakening job growth and persistent inflation. Data from ADP showed employers shed 32,000 jobs in November, signalling further pressure on the labour market.

In its accompanying statement, the Federal Open Market Committee said, "In considering the extent and timing of 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." CBS News reported that new quarterly projections indicate Fed officials expect to cut rates only once in 2026.

The Fed also released updated expectations for inflation, economic growth and unemployment for 2026. Officials forecast the Personal Consumption Expenditures index -- the Fed's preferred inflation measure -- will ease to 2.4 per cent next year, compared with a median estimate of 2.9 per cent for 2025. Economic growth is projected to rise to 2.3 per cent in 2026, while unemployment is expected to remain at 4.4 per cent.