Federal Reserve Cuts Interest Rates for Third Time in 2025

The Federal Reserve has reduced its benchmark interest rate by a quarter percentage point, marking the third cut in 2025. The new rate now falls between 3.5 percent and 3.75 percent. This decision reflects the central bank’s ongoing struggle to manage persistent inflation alongside a cooling labor market, as highlighted by Chair Jerome Powell during a press conference following the Federal Open Markets Committee meeting on December 10, 2025.

Chair Powell acknowledged the uncertainty surrounding the economic outlook, stating, “In the near term, risks to inflation are tilted to the upside, and risks to employment to the downside — a challenging situation.” Inflation remains above the Fed’s target of 2 percent, prompting concerns that reducing rates too quickly could exacerbate existing pressures.

Political implications of the interest rate cuts are significant. President Donald Trump expressed that he believes the reductions could have been more substantial, stating they “could have been doubled, at least doubled” during a roundtable discussion. This sentiment underscores the administration’s focus on economic affordability as the nation approaches the pivotal 2026 midterm elections.

The Federal Reserve’s decision comes as the government seeks to alleviate financial pressures on households after years of rising prices. The White House has been vocal about using lower interest rates as a tool to provide immediate relief to consumers. National Economic Council Director Kevin Hassett, a prominent candidate for the role of Fed chair, echoed this viewpoint, suggesting that the Fed has “plenty of room to cut rates” and may need to do more in the near future.

Democrats have criticized the Republican administration for its approach, arguing it shifts focus away from deeper structural issues causing affordability problems. Representative Sarah McBride of Delaware remarked that the current affordability crisis is “a choice by congressional Republicans and by Donald Trump,” highlighting a growing divide in economic strategy.

As President Trump promotes his economic record, he has emphasized tax cuts and falling energy prices in rallies, suggesting that the administration is committed to continued economic improvement. He assured supporters, “We’re bringing it down, and we’re coming down more,” indicating a push for further relief measures.

Critics of the rate cuts warn that aggressive reductions could lead to higher debt levels and risk overheating portions of the economy. Yet, the administration maintains that lower borrowing costs will expedite consumer relief, shaping the national dialogue on economic issues leading into the elections.

The Federal Reserve’s ongoing adjustments reflect the delicate balance policymakers must strike. As the effects of these interest rate cuts unfold, the central bank remains vigilant about navigating the complex interplay between inflation control and employment stability.