Fed rate decision today: second straight cut to 3.75%–4.00% as data go dark and December stays “not a foregone conclusion”

The Federal Reserve lowered its policy rate by 25 basis points on Wednesday, setting the federal funds target range at 3.75%–4.00% and extending a nascent easing cycle aimed at cushioning a cooling labor market while watching for tariff-linked inflation flare-ups. Chair Jerome Powell called the move a risk-management step that nudges policy closer to neutral, but stressed the path ahead is uncertain—especially with a government shutdown interrupting the regular flow of economic data.

What the Fed did—and why

Policymakers delivered a quarter-point cut for the second meeting in a row, the first time since 2022 that rates have slipped below 4%. The statement flagged rising downside risks to employment even as inflation progress has stalled in some categories. With official jobs and price reports delayed by the shutdown, the Fed leaned on alternative indicators showing slower hiring, softer labor demand, and uneven consumer momentum.

Two officials dissented from today’s action—one favoring a larger move, another preferring no cut—underscoring a committee split over how quickly to ease with inflation still above the 2% goal and new tariffs lifting some goods prices. The Fed also signaled a coming shift in balance-sheet policy, indicating it will cease runoff later this year, a step that could take some pressure off longer-term borrowing costs.

Powell’s message: cautious easing, no promises on December

At his press conference, Powell emphasized three themes:

• Labor over heat: The balance of risks has tilted toward employment. The cut is preemptive insurance against a deeper hiring slump.

• Tariff noise vs. trend: Higher import duties are pushing up specific prices; the baseline view is a one-time level shift, but persistence is a risk.

• Data blackout: With several federal releases delayed, officials will “do their jobs one way or another,” assembling a picture from private sources—but confidence bands are wider.

Bottom line from the podium: a December rate cut is not guaranteed. The committee wants clearer evidence on jobs, wages, and inflation before deciding whether to ease again.

The new policy setup at a glance

• Fed funds target: 3.75%–4.00% (−25 bps)

• Vote: Split, with two dissents in opposite directions

• Balance sheet: Runoff to end in December, guiding toward a steady holdings level

• Guidance: Data-dependent; December action contingent on labor-market and inflation signals once regular data resume

What it means for you

Mortgages: Long-term mortgage rates key off the 10-year Treasury and MBS spreads, not the policy rate directly. The end of balance-sheet runoff plus a milder rate path could nudge fixed mortgage rates modestly lower if markets believe inflation risks are contained.

Credit cards & HELOCs: These tend to move quickly with the prime rate, which follows the Fed. Expect interest charges to dip on variable-rate balances over the next statement cycle.

Auto & personal loans: Lenders will reprice gradually; shoppers may see slightly better financing by late November if funding costs keep easing.

Savings yields: High-yield accounts and short-term CDs will drift down as banks mark to market. Laddering maturities can help preserve today’s still-elevated coupons.

Markets and the economy: what to watch next

• Treasury curve reaction: A second trim with balance-sheet relief typically flattens the front end and steadies the belly. Sustained declines in term premiums would support housing and capex—if inflation expectations stay anchored.

• Jobs proxies: With official payrolls delayed, watch weekly jobless claims, private payroll trackers, and online postings data for confirmation of softer labor demand.

• Inflation mix: Tariff pass-through tends to hit goods first. If services inflation also re-accelerates, the Fed’s tolerance for further easing drops.

Why the committee is split

• Cut more, faster? One camp argues the labor market is cooling faster than headline data suggest; moving promptly could limit job losses and avoid a sharper U-turn later.

• Hold the line? The other side warns that tariff-driven price bumps, still-elevated wage growth, and sticky services inflation leave too little room for aggressive easing.

• Middle path adopted: Today’s quarter-point cut maintains optionality, giving the Fed time to read the economy once federal data resumes.

Timeline: from here to the December decision

The takeaway for rate watchers

The Fed rate cut to 3.75%–4.00% extends a cautious pivot toward easing, aimed at protecting jobs without surrendering the inflation fight. With the data firehose reduced to a trickle, officials are flying with wider margins of error—and they’re saying so out loud. That keeps December squarely data-dependent: if labor weakens and inflation behaves, another trim is plausible; if price pressures linger or growth steadies, the Fed may pause and reassess.

For households and businesses, that means incrementally lower borrowing costs, a likely drift down in savings yields, and a market now trading every fresh data point—official or proxy—as a referendum on what the Fed does next.