Brief Summary: Jerome Powell announced the third interest rate cut in 2025, bringing it to a range of 3.50%–3.75%, the lowest level in more than three years. He indicated that the decision aims to balance controlling inflation (currently around 3%) and maintaining a strong labor market.
📌 Key points from Jerome Powell's announcement
- Rate cut:
The Federal Reserve reduced rates by 25 basis points, leaving them in the range of 3.50%–3.75%. This is the third consecutive cut following the decisions in September and October.
- Motivation for the cut:
- Year-on-year inflation remains at 3%, still above the target of 2%.
- The labor market showed disruptions in recent reports due to the government shutdown, creating uncertainty.
- Powell emphasized that the Fed's mandate is to ensure maximum employment and price stability.
- Historical context:
- Rates had reached a high of 5.50% in July 2023, the highest level in 22 years.
- Since September 2025, the Fed began a series of cuts:
- September 2025: -0.25%
- October 2025: -0.25%
- December 2025: -0.25%
- Future outlook:
Powell did not confirm whether there will be more cuts in 2026, leaving the possibility open depending on the evolution of inflation and employment.
Additionally, he avoided commenting on whether he will continue at the Fed after his term ends in May 2026, stating that his priority is to hand over the economy in 'very good shape'.
🔑 Implications for the markets
- Cheaper credit: The cut lowers the cost of loans and mortgages, which could stimulate consumption and investment.
- Future uncertainty: Markets are attentive to signals regarding whether the Fed will continue this policy of cuts in 2026.
- Leadership change: Powell's succession generates expectations, as his replacement could adopt a more aggressive stance on cuts.
📌 Key points from Jerome Powell's announcement
- Rate cut:
The Federal Reserve reduced rates by 25 basis points, leaving them in the range of 3.50%–3.75%. This is the third consecutive cut following the decisions in September and October.
- Motivation for the cut:
- Year-on-year inflation remains at 3%, still above the target of 2%.
- The labor market showed disruptions in recent reports due to the government shutdown, creating uncertainty.
- Powell emphasized that the Fed's mandate is to ensure maximum employment and price stability.
- Historical context:
- Rates had reached a high of 5.50% in July 2023, the highest level in 22 years.
- Since September 2025, the Fed began a series of cuts:
- September 2025: -0.25%
- October 2025: -0.25%
- December 2025: -0.25%
- Future outlook:
Powell did not confirm whether there will be more cuts in 2026, leaving the possibility open depending on the evolution of inflation and employment.
Additionally, he avoided commenting on whether he will continue at the Fed after his term ends in May 2026, stating that his priority is to hand over the economy in 'very good shape'.
🔑 Implications for the markets
- Cheaper credit: The cut lowers the cost of loans and mortgages, which could stimulate consumption and investment.
- Future uncertainty: Markets are attentive to signals regarding whether the Fed will continue this policy of cuts in 2026.
- Leadership change: Powell's succession generates expectations, as his replacement could adopt a more aggressive stance on cuts.