Federal Reserve Cuts U.S. Interest Rates for 2nd Consecutive Time?

The Federal Reserve, America’s central bank, cut its benchmark interest rate for the second consecutive time on October 29. It did this in an effort to juice the U.S. economy and energize the labour market.

What Is the U.S. Interest Rate Now?

The Federal Reserve cut the U.S. interest rate by 25 basis points, or 0.25%, bringing it to a target range of 3.75% to 4.0%. The Fed meets one more time this year, in December. The median forecast is for another rate cut to the range of 3.5% to 3.75% with the possibility of four more interest-rate cuts in 2026.

While the 0.25% reduction makes borrowing cheaper and could bring financial relief to businesses and consumers carrying debt, there is some concern that it could heat up inflation. While U.S. economic activity is expanding, jobs growth has slowed at a time that inflation has increased to 3.0%, well above the target rate of 2.0%.

Some economists were looking for a more dramatic 50-basis-point (0.5%) cut to interest rates. However, with the U.S. government still in shutdown mode, investors and the Fed are not able to rely on key economic data—in particular, the monthly U.S. jobs report, the job openings and labour turnover survey, factory orders, consumer sentiment, the consumer price index, consumer credit, retail sales, and housing starts.

“What do you do if you’re driving in the fog?” That’s what Federal Reserve Chairman Jerome Powell asked during a Federal Open Market Committee meeting. “You slow down,” he said.

What’s Really Going on with the U.S. Economy?

But others are not so sure about that. Does a lack of economic data mean that the Federal Reserve should slow down or err on the side that it’s better to be safe than sorry?

U.S. Treasury Secretary Scott Bessent has stated that parts of the U.S. economy are already in a recession, putting the blame squarely on the Federal Reserve’s monetary policies. He has urged the central bank to ramp up interest-rate cuts.

There is some sentiment to back this up. The U.S. economy appears to be doing OK, but there’s a big divide between what’s happening on Main Street and Wall Street. Stocks are at record levels, but much of that has to do with investment in artificial intelligence (AI).

U.S. President Donald Trump’s policies are creating uncertainty that is preventing many companies, especially those not in the artificial intelligence space, to cut back on making investments. This has resulted in a big reduction in hiring and business investments. Without the booming investment in AI, it’s quite possible that the U.S. economy would be in a recession.

This puts the onus on the Federal Reserve to perhaps accelerate its lower-interest-rate policy over the coming months and quarters. And that would be good for consumers, businesses, and the stock market.

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