Fed Cuts Rates Again: The December 2025 Update

Here is a concise overview of the December 10, 2025 Federal Reserve announcement, broken down into what you need to know, what it means for your wallet, and the pros and cons for the market.

The Headline:
On Wednesday, December 10, 2025, the Federal Reserve cut its benchmark interest rate by 0.25 percentage points (25 basis points). This brings the federal funds rate down to a range of 3.50% to 3.75%.

The Big Picture:
This is the third consecutive rate cut, but it wasn't an easy decision. The vote highlighted a rare division among Fed officials: some wanted a bigger cut to protect jobs, while others wanted no cut at all because they worry inflation is still lingering.

Despite the cut, the Fed signaled caution for the future. Projections show they may only cut rates once in 2026, suggesting the era of rapid easing might be slowing down as they try to balance supporting a cooling labor market without letting inflation reignite.

When the Fed cuts rates, it lowers the cost of borrowing money. This affects everything from mortgage rates to credit card APRs and business loans.

• Is it good to borrow cheaper? Generally, yes. It encourages businesses to invest and hire, and it makes buying a home more affordable for consumers. This acts as "fuel" for the economy.
• The Inflation Risk: The danger is adding too much fuel. If money is too cheap and people spend too much, prices go up (inflation). The Fed is walking a tightrope: they want to make borrowing cheap enough to stop unemployment from rising, but not so cheap that prices spike again.

Buried in the technical notes was a significant move: the Fed will resume purchasing short-term Treasury securities. This is a technical plumbing fix to ensure there is enough cash (reserves) in the banking system. For the markets, this is often seen as a "mini-stimulus" because it increases liquidity.