Fed lowers rates as anticipated, signals pause in further easing

The US Federal Reserve lowered interest rates by 25 basis points on Wednesday, as widely anticipated, but signaled a likely pause in early 2026, awaiting clearer indications from the labor market and persistent inflation pressures.

The Fed’s updated projections—one rate cut in 2026 and another in 2027—contrast with earlier expectations of two cuts next year, adding uncertainty to the monetary policy outlook amid an impending leadership transition at the central bank.

Future policy decisions will also depend on delayed economic data from October and November, affected by the federal government shutdown, and on broader economic performance as the US approaches a midterm-election year under President Donald Trump, who continues to advocate for more aggressive rate reductions.

On Wednesday, President Trump commented that the Fed’s rate cut was modest and could have been larger, echoing recent dovish remarks from the frontrunner for the next Fed chair, who suggested that there remains considerable room for further easing.