Fed Cuts Interest Rates Again to Protect Jobs as Economic Risks Grow

The Federal Reserve has once again cut its benchmark interest rate, aiming to breathe some life into the stagnating job market and prevent a surge in unemployment by lowering borrowing costs.

The Fed’s policy committee voted to cut the fed funds rate by a quarter point to a range of 3.75% to 4% Wednesday, following up a cut of the same size in September. In recent months, Fed officials have voiced more growing concerns about the health of the labor market as job growth has slowed. That has led them to prioritize boosting hiring over fighting inflation, which is still running above the Fed’s target of a 2% annual rate. The move was widely expected in financial markets.

Wednesday’s cut confirmed that, at least for now, boosting employment remains the Fed’s primary goal, with the battle against inflation on the back burner. Before September, Fed officials had held the rate steady all year in hopes of wrestling inflation down to the 2% target.

The fed funds rate influences borrowing costs on all kinds of loans and is the primary tool the Fed uses in pursuing its dual mandate from Congress of keeping inflation low and employment high.

“Uncertainty about the economic outlook remains elevated,” the Federal Open Market Committee wrote in a statement little changed from its official statement at its September meeting. “The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months.”

The decision was not unanimous, with two Fed governors dissenting from the other 10 voters in opposite directions. Stephen Miran, President Donald Trump’s appointee to the Fed’s governing board, voted to lower rates more steeply, by half a percentage point, while Jeffrey Schmid, president of the Kansas City Fed, preferred to hold the rate steady.

The Fed also said it was stopping its quantitative tightening program that had been removing money from the financial system. The Fed will stop reducing its securities as of Dec. 1. That move also puts downward pressure on interest rates.

Fed officials made the move despite lacking crucial information about inflation and employment. Most economic data from the government’s statistical agencies has been delayed by the ongoing government shutdown that began Oct. 1. A notable exception was the September Consumer Price Index, which showed inflation staying higher than the Fed’s goal but rising less than expected, giving the Fed the green light to cut rates.

The fed funds rate is directly tied to the rates banks charge for credit cards, car loans, and other short-term debt, and indirectly influences rates for mortgages and other longer-term loans. Wednesday’s move brings it to its lowest since December 2022.

Trump’s economic policies have created a dilemma for the Fed: tariffs have pushed up consumer prices, putting upward pressure on inflation, while simultaneously creating uncertainty that has hindered job growth.

Update, Oct. 29, 2025: Added a paragraph about the end of quantitative tightening. This article was originally published Oct. 29. 2025.