In a widely expected move, the Fed voted to cut the federal funds rate by 25 bps, marking the third and final rate cut of 2025. Of the 12 voting members, 9 voted in favor of a 25 bps reduction. Fed Governor Stephen Miran dissented in favor of a 50 bps cut, while Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeffrey Schmid dissented in favor of no cut.
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The Fed’s decision was in line with CME’s FedWatch tool, which assigned 89.4% odds of a 25 bps reduction prior to the announcement. An unchanged rate carried slim odds of 10.6%.
In its Federal Open Market Committee (FOMC) statement, the Fed noted that economic activity has expanded at a “moderate pace” amid slowing job gains and “somewhat elevated” inflation.
At the same time, the central bank now expects 2.3% gross domestic product (GDP) growth in 2026, up from its prior estimate of 1.8%. It also expects price consumer expenditures (PCE) inflation of 2.4%, down from 2.6%, signaling a faster pace of cooling prices.
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