Federal Reserve Divided on Third Rate Cut as 2025 Nears End
As the Federal Reserve approaches its final meeting of 2025, it remains divided on whether to deliver a third interest rate cut this year. The target range currently stands at 3.75% to 4%. Markets widely expect a rate reduction at the Wednesday Federal Open Market Committee (FOMC) decision, though there is no consensus among officials.
Earlier this year, the Fed cut rates by a total of 0.5 percentage points in September and October after maintaining restraint on previous occasions. However, October economic data was canceled due to a government shutdown, and November data was released later in December, adding to the uncertainty surrounding the policy decision.
A growing number of FOMC members have voiced support for a third cut, while others caution against moving too quickly. Federal Reserve Chair Jerome Powell emphasized the need to balance inflation control with a strong labor market, likening the current environment to "driving in the fog" due to uncertain data.
Given the lack of timely economic indicators, the Fed is expected to take a cautious approach in its December meeting. The institution continues to adhere to its dual mandate of promoting maximum employment and stable prices.
Meanwhile, speculation surrounds the future leadership of the Fed as President Trump reportedly considers Kevin Hassett, director of the National Economic Council, as a potential successor to Powell, whose term expires in May 2026. Hassett is seen as favoring more aggressive rate cuts.
This upcoming meeting will be the eighth of the FOMC in 2025, with all 12 voting members participating in the decision-making process.
