US Federal Reserve Cuts Interest Rates by 25 Bps, Projects One More Cut in 2026

The US Federal Reserve has slashed the key interest rates by 25 bps, announcing a third straight rate reduction. The FOMC stated in its official statement on Wednesday that the Committee decided to lower the target range for the federal funds rate, in order to support its objectives and in response to the change in the balance of risks.

The choice was made during the two-day FOMC session. The committee chose to reduce the range by 0.25 percentage points to 3.5%-3.75%. Federal Reserve authorities lowered interest rates for the third time in a row, as stated above. With a 9-3 vote, the increasingly divided Federal Open Market Committee made its decision.

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Prior to the first reduction in September, the central bank had kept rates unchanged for almost a year, from December 2024, before beginning to ease as evidence of stress started to surface throughout the economy. The main goal of the central bank is to strike a balance between its dual responsibilities of maintaining price stability and meeting the needs of the nation’s labor market, says reports.

A Rate from the US Fed Cut transforms India’s financial landscape by affecting capital flows, currency valuations, borrowing costs, trade dynamics and inflationary pressures, according to some reports. The reports indicate that India is no exception to the impact of a rate reduction by the central bank of the world’s largest economy on markets worldwide.

Although Powell’s tenure on the Fed’s Board of Governors expires in 2028, he is scheduled to step down as Fed chair in May 2026. When Powell’s term ends, Kevin Hassett has become the frontrunner to take his place.