The US Federal Reserve on Wednesday cut its benchmark interest rate by a quarter of a percentage point, to a new range of 3.75 percent to 4 percent. This marks back-to-back rate cuts by the Fed after a similar reduction on September 17 and its fifth rate cut since September 2024.

The Federal Open Market Committee (FOMC), the Fed's policy-making body, says that current indicators suggest economic activity has been expanding at a moderate pace. Job growth has slowed this year, and the unemployment rate has risen slightly, while downside risks have recently increased. On the other hand, inflation has picked up since the beginning of the year and remains elevated. The FOMC believes uncertainties regarding the economic outlook remain high. 

In light of the shifting balance of risks, it decided to lower the target range for the federal funds rate by 25 basis points. In addition to the rate move, the Fed announced that it would be ending the reduction of its asset purchases—a process known as quantitative tightening–on December 1.

The Fed's policy action came at a time when the US government shutdown is about to complete a month, and with key data releases being delayed. 

An analysis from ICBC International stated that historical experience shows a non-linear positive correlation between the duration of government shutdowns and economic losses. As a shutdown persists, economic losses—particularly the proportion of permanent losses that are difficult to recover or compensate—further amplify. Although the Federal Reserve's policy objectives will not change due to a government shutdown, fiscal absence complicates the environment for monetary policy. In the face of increasing economic risks, they expect the Fed to accelerate monetary easing both in terms of timing and policy framework. 

The Fed meets next in December.