The central bank cut rates for the third time in 2025 as limited government data clouds economic outlook.

The United States Federal Reserve has cut interest rates by a quarter of a percentage point, marking the last rate cut of the year.

On Wednesday, the Federal Reserve cut its benchmark interest rate by 25 basis points to 3.50-3.75 percent as US job growth has appeared to stall.

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“Job gains have slowed this year, and the unemployment rate has edged up through September. More recent indicators are consistent with these developments. Inflation has moved up since earlier in the year and remains somewhat elevated,” the central bank said in a statement.

The cut was widely expected, with an 89 percent probability of a rate cut, according to the CME FedWatch, a tracker that monitors the likelihood of monetary policy decisions.

The decision came as the central bank faced gaps in many sets of government data used to assess the state of the US economy. During the record-long 43-day government shutdown, key agencies, including the Department of Labor, were unable to gather information needed for their reports.

Among them were import and export prices, the producer price index report, as well state employment and unemployment. The Bureau of Labor Statistics on Monday said that it would not release numbers from October because the agency did not have enough resources to collect information.

The last top-line data that the central bank had to make its interest rate decision was from September. At the time, the unemployment rate rose slightly to 4.4 percent, and the core inflation rose to 2.8 percent.

“The labour market has continued to cool gradually… a touch more gradually than we thought,” Fed Chair Jerome Powell said at a news conference after the rate cut decision.

A new government report on Wednesday showed US labour costs increased 0.8 percent in the third quarter, slightly less than expected.

The central bank might be more cautious about interest rate cuts in the next year as economic data shows a cooling labour market.

“There is considerable uncertainty around the labour market, but some of the weights should begin to lift early next year,” Ryan Sweet, managing director, US Macro Forecasting and Analysis at Oxford Economics, said in a report published ahead of the central bank’s decision.

“The challenge facing the Fed next year is the potential jobless expansion, when GDP increases but employment gains are modest, at best. This leaves the economy vulnerable to shocks because the labour market is the main firewall against a recession.”

Political turmoil

While the Fed has maintained its independence from partisan interference, there has been increased pressure from US President Donald Trump to cut rates further, and he has often used hostile rhetoric towards the Fed chair to do it. The first rate cut in Trump’s second term as president came only in September.

The White House has also installed loyalist Stephen Miran to the Fed board, where he is on leave from his job as an economic adviser in the White House. Miran has dissented against the 25 basis point rate cut that was undertaken at each of the two meetings he has attended in favour of larger half-percentage-point cuts.

On Wednesday, Miran, again, voted for a more aggressive cut of half a percentage point while governors Austan D Goolsbee and Jeffrey R Schmid voted not to make a rate cut at all. The other governors all voted for a 25 basis point cut.

“Still-elevated inflation and a backlog of economic data complicate the picture for the Fed looking into next year — with President Trump’s aggressive push for lower short-term rates potentially complicating the objective of bringing down longer-term borrowing costs,” Daniel Hornung, policy fellow at Stanford Institute for Economic Policy Research, said in remarks provided to Al Jazeera.

Fed Chair Powell’s term is up in mid-May 2026. Trump, in an interview published on Tuesday in news outlet Politico, said support for immediately cutting interest rates would be a requirement for anyone he chose to lead the Federal Reserve.

Wednesday’s decision was underscored by an upcoming Supreme Court decision that would either allow Trump to fire Fed Governor Lisa Cook or not after she was accused of mortgage fraud. When asked about the looming decision, Powell said, “We are not legal commentators.”