October 29, 2025—As widely expected, the Federal Open Market Committee (FOMC) voted by a margin of 10-2 to cut the federal funds rate 25 basis points for its second straight meeting, to a range of 3.75 – 4.00%, signaling that even as inflation remains elevated, it is not accelerating, and is not a great concern for the Fed going forward. Voting against the rate cut were Stephen Miran, who preferred to lower the target range for the federal funds rate by 50 basis points at this meeting, and Jeffrey Schmid, who preferred no change to the target range for the federal funds rate at this meeting. Another 25 basis point rate cut is widely expected by many at the next meeting in December, however, Fed Chair Jerome Powell said “In the Committee’s discussions at this meeting, there were strongly differing views about how to proceed in December. A further reduction in the policy rate at the December meeting is not a foregone conclusion—far from it.”
In addition to the rate change, the FOMC announced an end to its quantitative tightening schedule, in which the Fed has sought to shrink its balance sheet by not reinvesting the proceeds from its MBS and Treasury portfolios. This program has been in place since April 2022, when the Fed’s balance sheet had grown to over $9 trillion. It has since shrunk to about $6.6 trillion. Beginning on December 1, the proceeds from all MBS and Treasury securities will be reinvested in new T-Bills.
In his press conference after the meeting, Chairman Powell acknowledged that while recent weaker employment numbers have been concerning, the Committee still needs to take a balanced approach to both sides of their dual mandate of full employment and neutral interest rates.