Research
December 10, 2025
Monetary Policy
Federal Reserve cuts interest rates for the third time this year
The Federal Open Market Committee (FOMC) lowered short-term interest rates by 25 basis points at its December 9–10 meeting, following similar cuts in September and October. The new target range for the federal funds rate is now 3.50% to 3.75%.
The FOMC reaffirmed its commitment to its dual mandate of maximum employment and 2% inflation over the longer term. This move signals a heightened concern for labor market conditions relative to inflation. As noted in the statement, “Job gains have slowed this year, and the unemployment rate has edged up through September,” while acknowledging that “Inflation has moved up since earlier in the year and remains somewhat elevated.”
Three members dissented. Stephen I. Miran, the newest member of the Board of Governors, favored a more aggressive 50 basis point cut to a range of 3.25% to 3.50%. Meanwhile, Chicago Fed President Austan D. Goolsbee and Kansas City Fed President Jeffrey R. Schmidt preferred no rate change at this meeting.
Looking ahead, future cuts will hinge on “incoming data, the evolving outlook, and the balance of risks.” The statement emphasized consideration of labor market conditions, inflation pressures and expectations, and global developments. In its economic projections, participants forecast a median of one rate cut in 2026, though opinions varied widely. (By contrast, we continue to anticipate 2–3 cuts next year.) Fed officials expect stronger economic growth of 2.3% in 2026, with unemployment at 4.4% and core inflation at 2.5%.
For the restaurant industry, elevated interest rates continue to weigh on borrowing costs, delaying expansion plans and capital investments. A lower rate environment could help ease credit burdens, bolster consumer spending, and support demand in sectors sensitive to discretionary income, including foodservice and hospitality.
The FOMC reaffirmed its commitment to its dual mandate of maximum employment and 2% inflation over the longer term. This move signals a heightened concern for labor market conditions relative to inflation. As noted in the statement, “Job gains have slowed this year, and the unemployment rate has edged up through September,” while acknowledging that “Inflation has moved up since earlier in the year and remains somewhat elevated.”
Three members dissented. Stephen I. Miran, the newest member of the Board of Governors, favored a more aggressive 50 basis point cut to a range of 3.25% to 3.50%. Meanwhile, Chicago Fed President Austan D. Goolsbee and Kansas City Fed President Jeffrey R. Schmidt preferred no rate change at this meeting.
Looking ahead, future cuts will hinge on “incoming data, the evolving outlook, and the balance of risks.” The statement emphasized consideration of labor market conditions, inflation pressures and expectations, and global developments. In its economic projections, participants forecast a median of one rate cut in 2026, though opinions varied widely. (By contrast, we continue to anticipate 2–3 cuts next year.) Fed officials expect stronger economic growth of 2.3% in 2026, with unemployment at 4.4% and core inflation at 2.5%.
For the restaurant industry, elevated interest rates continue to weigh on borrowing costs, delaying expansion plans and capital investments. A lower rate environment could help ease credit burdens, bolster consumer spending, and support demand in sectors sensitive to discretionary income, including foodservice and hospitality.