Federal Reserve Cuts Interest Rates for Third Consecutive Time in 2025

In a move that was not unexpected, the Federal Reserve (Fed) made its final decision of the year on December 10, 2025, delivering its third consecutive interest rate cut. This marked a continuation of the Fed's efforts to support economic growth and combat inflation.

The Decision: A Quarter Point Cut

As predicted by FedWatch, the Fed dropped interest rates by a quarter point (0.25%) for the third time in 2025. This decision was made with the aim of maintaining economic momentum while also keeping inflation under control.

Context: Economic Growth and Inflation

The Fed's decision was influenced by a range of factors, including ongoing economic growth, concerns about inflation, and the global economic landscape. As of the December 10 meeting, the US economy was experiencing a period of sustained growth, with low unemployment rates and rising consumer spending.

However, the Fed also acknowledged that inflation remained a challenge. Despite the Federal Reserve's efforts to raise interest rates in previous months, inflation had failed to decrease as expected. This led to concerns about wage pressures, supply chain disruptions, and upward pressure on prices.

The Impact of Previous Rate Cuts

The two rate cuts made by the Fed prior to this meeting (in June and September 2025) aimed to stimulate economic growth and alleviate inflationary pressures. These moves were seen as necessary to maintain a balanced economy and avoid a recession.

While the initial impact of these rate cuts was positive, with GDP growth accelerating and consumer confidence improving, their effects may be starting to wear off. As a result, the Fed's decision to cut rates again underscores its commitment to supporting economic growth while maintaining control over inflation.

Global Economic Outlook

The global economic landscape also played a significant role in shaping the Fed's decision. International trade tensions, COVID-19-related disruptions, and shifting commodity prices have all contributed to uncertainty and volatility.

Given these factors, the Fed's decision was likely influenced by concerns about the potential impact of global events on the US economy. By cutting rates, the Fed aims to maintain a stable economic environment and prevent any adverse effects from spreading.

Market Reaction

The market reaction to the Fed's decision has been relatively muted. As expected, interest rate futures fell following the announcement, as investors anticipated that lower interest rates would reduce borrowing costs for consumers and businesses.

However, equities have not responded dramatically, with stock markets showing a relatively stable performance in the hours following the decision. This may suggest that market participants are beginning to anticipate future Fed actions and are therefore adjusting their expectations accordingly.

Conclusion

The Federal Reserve's decision to cut interest rates for the third time in 2025 reflects its ongoing efforts to balance economic growth with inflation concerns. As the year draws to a close, it remains to be seen how these decisions will impact the US economy in the months ahead.

One thing is clear: the Fed will continue to closely monitor economic indicators and adjust policy accordingly to maintain stability and growth.