The US Federal Reserve slashed its benchmark federal funds rate by 25 basis points Wednesday, between the 3.5% - 3.75% target range, as widely expected.
It marked the third and final rate cut of 2025, as the bank had held the rate unchanged in the five previous meetings before cutting it at a September meeting.
The Fed said available data suggested that economic activity has been expanding at a moderate pace.
"Job gains have slowed this year, and the unemployment rate has edged up through September. More recent indicators are consistent with these developments," it said.
It noted that inflation has moved up since earlier in the year and remains "somewhat" elevated.
The Fed said the Federal Open Market Committee (FOMC), which makes decisions about interest rates, seeks to achieve maximum employment and inflation at a rate of 2% in the longer run.
"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," it emphasized.
The Fed said in considering the extent and timing of additional adjustments to the target range for the policy, the FOMC will "carefully" assess incoming data, the evolving outlook and the balance of risks.
"The Committee judges that reserve balances have declined to ample levels and will initiate purchases of shorter-term Treasury securities as needed to maintain an ample supply of reserves on an ongoing basis," it added.
The decision to lower the rate was supported by nine of 12 governors, with Stephen Miran supporting a 50 basis point cut and Jeffrey Schmid and Austan Goolsbee voting for no change.
The move followed a mixed labor market in recent months. Maximum employment and stable prices are the dual mandate the Fed watches when determining monetary policy.
Despite the lack of official government data because of a now-resolved government shutdown, hiring has flattened, with occasional indications that layoffs are speeding up. Job postings barely changed in October, according to a Bureau of Labor Statistics data released Tuesday, while hiring decreased by 218,000 and layoffs increased 73,000.
Nonfarm payrolls increased 119,000 in September, above expectations, rebounding from a decline of 4,000 in August.
On inflation, the consumer price index (CPI) was up 3% annually in September, while rising 0.3% month-on-month, both below expectations.
The core personal consumption expenditure (PCE) price index excluding food and energy, the Fed's inflation benchmark, climbed 0.2% month-on-month and 2.8% year-on-year in September.
The rate cut also followed US President Donald Trump's repeated criticism of Fed Chair Jerome Powell, accusing him of failing to act swiftly as economic risks mount, and his intervention in the Fed's Board of Governors. Trump has repeatedly demanded that the central bank cut interest rates, citing moves by the European central banks and warned that delays could stall the US economy.
Despite the political pressure, the Fed kept the rate unchanged for most of the year before starting an easing cycle due to a weakening labor market.
The central bank had kept the rate at the historically high level of 5.5% from July 2023 to September 2024 before gradually lowering it to 4.5% last December.
