Tds Virals Business and Finance Desk: Big Decision from the Federal Reserve – In a major economic development, the U.S. Federal Reserve (Fed) has announced its second interest rate cut of 2025, signaling a shift toward easier monetary policy amid slowing job growth and stubborn inflation.
Alongside this move, the Fed also declared that it will end its balance sheet run-off program (Quantitative Tightening, or QT) in December 2025 a decision aimed at stabilizing financial markets and ensuring adequate liquidity.
Why the Fed Cut Rates Again – Fed rate cut 2025 | Even before the U.S. government shutdown, economic data suggested that while layoffs remained limited, hiring momentum had flattened. Inflation, meanwhile, has stayed well above the Fed’s 2% target, hovering around 3% as per last week’s Consumer Price Index (CPI) report.
Rising energy prices and the ongoing effects of tariff-linked costs have pushed consumer prices higher, adding pressure on households.
The Federal Reserve, led by Chair Jerome Powell, aims to balance full employment with price stability. However, officials recently expressed growing concern over the job market, which played a key role in their decision to ease monetary policy once again.
End of Quantitative Tightening (QT) Fed rate cut 2025 – Alongside the rate cut, the Fed confirmed it will end its balance sheet reduction process in December. The QT program which started in 2022 had already trimmed about $2.3 trillion from the central bank’s $6.6 trillion portfolio of Treasuries and mortgage-backed securities.
Fed rate cut 2025 – Under QT, the Fed had been allowing bonds to mature without reinvestment, slowly reducing its holdings. But recent strains in short-term lending markets raised fears that the program may have tightened financial conditions too much.
An implementation note clarified that starting December, proceeds from maturing mortgage-backed securities will be reinvested into short-term Treasury bills, signaling a more cautious approach.
Fed rate cut 2025 – Market Reaction and Analyst Views, Financial markets had already anticipated this move. Many analysts predicted that QT would end by late 2025, and the Fed’s announcement confirmed that timeline.
Fed rate cut 2025 – The Fed’s balance sheet had ballooned from just over $4 trillion to nearly $9 trillion during the Covid-19 pandemic, as it bought bonds to stabilize the economy.
Evercore ISI analyst Krishna Guha suggested that the Fed could even restart limited bond purchases in 2026 to support organic growth depending on how market conditions evolve. Historically,
the Fed rarely loosens policy during economic expansions or bull markets, but the current mix of strong stock performance and moderate inflation makes this cycle unique.
Impact on Wall Street – Fed’s Bold Move Fed rate cut 2025, Despite rate cuts typically signaling caution, U.S. stock markets have been on a record-breaking streak. Big Tech stocks continue to lead the rally,
supported by strong earnings and investor optimism. Historically, stock markets tend to perform well in the months following Fed rate cuts — as easier monetary conditions boost liquidity and corporate borrowing.
However, some economists caution that easier policy could reignite inflation pressures, forcing the Fed to tighten again later. The central bank’s challenge now lies in ensuring that growth continues without triggering another inflation surge.
Fed rate cut 2025
The Fed’s twin moves – cutting rates and ending QT mark a crucial turning point for the U.S. economy.
Investors and consumers alike will be watching closely as the effects ripple through interest rates, lending, and markets. While optimism remains, the Fed must navigate a delicate balance between stimulating growth and containing inflation in 2026.
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