By Nick Timiraos
DOW JONES–The Federal Reserve cut interest rates for the second straight day to prevent the recent decline in employment from becoming a serious problem. The decision to cut the key interest rate by 25 basis points to 3.75 to 4.00 percent was made with two votes against in the Federal Open Market Committee (FOMC). Governor Stephen Miran voted for one Interest rate cut by 50 basis points, Kansas City Fed President Jeffrey Schmid voted to maintain interest rates.
However, the easiest part of rate cuts may be over as central bankers debate how far they should go. This delicate task is made more difficult by a data outage due to the shutdown.
Central bankers, meanwhile, agreed to end their three-and-a-half-year campaign to reduce the Fed’s $6.6 trillion asset portfolio on December 1. This measure was aimed at passively scaling back pandemic stimulus measures.
Central bankers had long said they would stop reducing the balance sheet as soon as they saw signs in overnight markets that banks were no longer awash with excess cash. These signs have increased over the past week. The Fed will continue to reduce its holdings of mortgage-backed securities but will replace bonds maturing with short-term Treasury bills starting in December.
Expectations of a rate cut at this meeting were so entrenched in the markets that the focus had already shifted to the central bank’s last meeting in December this year. The current debate at this meeting could determine what it would take for the Fed to do nothing in December rather than cut rates again.
Collaboration: Andreas Plecko
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(END) Dow Jones Newswires
October 29, 2025 2:16 p.m. ET (18:16 GMT)