Fed cuts interest rates by 0.25% in bid to bolster weak labor market

Updated 10/30/2025 9:18:00 AM

Arab Finance: The Federal Reserve cut its benchmark interest rate by a quarter of a percentage point on October 29^th.

This marks its second interest rate cut in 2025, as an attempt to revive a slowing labor market.

The expected cut delivers a rate reduction sought by President Donald Trump, though it falls short of the steeper drawdown the president has repeatedly urged.

Fed Chair Jerome Powell signaled uncertainty about the outlook for further easing, despite the central bank’s earlier projection of another quarter-point cut in December.

"A further reduction of the policy rate in December is not a foregone conclusion -- in fact, far from it," Powell told reporters at a press conference in Washington, D.C.

Powell acknowledged the economic toll of the ongoing federal government shutdown but downplayed its lasting impact.

"The shutdown of the federal government will weigh on economic activity while it persists, but these effects should reverse when the shutdown ends," Powell said.

The rate decision comes amid rising inflation and weakening job growth, a troubling combination that has raised fears of “stagflation,” where high prices coincide with sluggish hiring.

A government report last week showed inflation continuing to accelerate, complicating the Fed’s task of balancing its dual mandate to promote stable prices and maximum employment.

"Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months," the Federal Open Market Committee (FOMC), a policymaking body at the Fed, said in a statement on Wednesday.