- Decision
- Lower
- Rate change
- 25 bps
- federal funds rate
- 4%
The Federal Open Market Committee lowered the federal funds rate target range by 25 bp to 3.75%–4.00%, citing moderate economic growth, slowing job gains, a slight rise in the unemployment rate and inflation that has increased since earlier in the year but remains above the 2 percent goal, while noting heightened uncertainty and greater downside risks to employment. This marks a second consecutive 25 bp cut following a reduction to 4.00%–4.25% in September after holding rates at 4.25%–4.50% since January. The Committee also decided to end the run-off of its securities portfolio on 1 December, signalling a halt to balance-sheet reduction. It emphasized continued monitoring of labour-market conditions, inflation pressures, expectations, and broader financial and international developments, and reiterated its readiness to adjust policy further as needed to achieve its dual mandate.
Rate evolution
From June 2025 to September 2026, the Federal Reserve lowered the target range for the federal funds rate by a net 50 basis points, from 4-1/4 to 4-1/2 percent to 3-3/4 to 4 percent, after holding steady through mid-2025, cutting over September to December, pausing through July 2026 and raising the range in September. The initial holds reflected activity that was still expanding, a low unemployment rate and solid labor market conditions, alongside inflation that remained somewhat elevated, while uncertainty had diminished somewhat in June but was still elevated and risks were seen on both sides of the dual mandate. Cuts began as growth moderated, job gains slowed, unemployment edged up and the Committee judged downside risks to employment had risen, even though inflation had moved up and remained somewhat elevated, with the late-2025 easing accompanied by dissents both for larger cuts and for no change.
The Committee kept the federal funds rate unchanged in April, June and July 2026 as activity expanded at a solid pace, unemployment changed little and inflation remained elevated. April cited higher global energy prices, while June and July pointed to supply shocks that drove price increases in certain sectors, including energy, and highlighted strong productivity growth, capital investment and job gains that kept pace with the workforce, while linking elevated uncertainty in part to the conflict in the Middle East. After three members dissented in July in favor of a 1/4 percentage point increase, the Committee unanimously raised the target range by that amount on September 16, citing resilient domestic spending, strong productivity growth, robust capital investment and elevated inflation, and said the action would support a timelier return to its 2 percent goal.