The Federal Reserve announced on Wednesday it will reduce interest rates by a quarter of a percentage point for a third straight time, a win for President Donald Trump despite a more-than-complicated economic picture facing the nation.
The decision came during the central bank’s final meeting of the year. The Fed previously cut rates in October by a quarter point, a move that economists remain divided on, given that inflation remains around 3%
Job growth in 2025 has been weak, and the Fed remains in a tricky situation. It typically aims to keep inflation under 2%, in part by raising interest rates when inflation runs hot, which in turn tightens the amount of money flowing into the national economy. But the Fed is also under pressure, including from Trump, to boost employment by cutting interest rates.
Further complicating the Fed’s decision is the lack of data from October and November due to the government shutdown. The Bureau of Labor Statistics has not released a monthly jobs report or any other economic data since September.
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Fed Chair Jerome Powell said after the vote that the economic outlook has stayed largely unchanged since October, but weak jobs data from external analysts pushed the Fed to lower interest rates. He acknowledged the tension between lowering inflation and supporting job growth.
“There is no risk-free path,” Powell said during a press conference. “You’ve got one tool; you can’t do two things at once.”
Despite the risks, Powell expressed cautious optimism about the outlook on the economy in the coming years, and didn’t make promises on whether the committee would lower rates again next year.
“We’re well-positioned to wait and see going into next year,” Powell said. “We’ll just have to see.”
The cut will drop interest rates to between 3.5% and 3.75% going into 2026. Nine of the 12 Federal Open Market Committee members voted in favor of the rate change.
Some economists have pushed for more dramatic rate cuts to avoid a recession. Trump has been adamant that the Fed was moving too slowly to cut interest rates and has been vocal in his disapproval of Fed Chair Jerome Powell, eliminating the traditional separation between the central bank and the president.
Trump frequently discusses the possibility of replacing Powell, whose term is up in May. Wednesday’s meeting was the last of his term.
“You know we have a bad head of the Fed,” Trump said during a rally Tuesday. “We would be making a change.”
Trump has yet to say who he will select to be the next Federal Reserve chair, but his chief economic adviser, Kevin Hassett, is reportedly under consideration.
During his speech Tuesday in Pennsylvania on the economy, Trump repeatedly blamed the state of inflation on Democrats and former President Joe Biden, despite also citing data showing inflation was down.
Tariffs, which are central to the Trump administration’s economic strategy, are helping push inflation back up. The administration acknowledged this, albeit indirectly, with the announcement earlier this week of $12 billion in subsidies for American farmers who have been hit hard by rising fertilizer and farm equipment costs.
Trump has repeatedly claimed concerns about rising prices and affordability are a “Democrat hoax,” a difficult line at a time when voters increasingly view the White House and the national economy unfavorably.
This article has been updated with comments from Fed Chair Jerome Powell.
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