As of its December 9-10, 2025 meetings, the Federal Reserve announced it is cutting its federal funds interest rate to 3.5% – 3.75%. This is the third time this year, in 2025, that the federal funds interest rate has gone down. This marks the third time in 2025 that the federal funds rate has been lowered. The decision came after the Federal Open Market Committee’s December meeting
The Fed stated that their benchmark inflation rate is still 2%, that wage growth is sticking close to inflation, and unemployment edged up. The Fed’s press release stated, “Available indicators suggest that economic activity has been expanding at a moderate pace. 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.”
Before making any changes to interest rates, the Committee will look closely at new economic data, how the outlook is shifting, and potential risks. Their main focus is to keep the job market strong and bring inflation to around 2%.
The Federal Reserve’s 2025 Interest Rate Announcement Schedule
The Federal Open Market Committee (FOMC) meets eight times a year and announces its decision on what to do with the benchmark interest rate. The schedule for 2025 is as follows:
- January 28-29
- March 18-19
- May 6-7
- June 17-18
- July 29-30
- September 16-17
- October 28-29
- December 9-10
Read the full December 10th FOMC statement below:
Available indicators suggest that economic activity has been expanding at a moderate pace. 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 Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months.
In support of its goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 3-1/2 to 3‑3/4 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
The Committee judges that reserve balances have declined to ample levels and will initiate purchases of shorter-term Treasury securities as needed to maintain an ample supply of reserves on an ongoing basis.
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Susan M. Collins; Lisa D. Cook; Philip N. Jefferson; Alberto G. Musalem; and Christopher J. Waller. Voting against this action were Stephen I. Miran, who preferred to lower the target range for the federal funds rate by 1/2 percentage point at this meeting; and Austan D. Goolsbee and Jeffrey R. Schmid, who preferred no change to the target range for the federal funds rate at this meeting.
What is the Benchmark Interest Rate and What Does it Mean for Homebuyers and Homeowners?
It’s important to look at the broader economic picture when buying or selling a home. These interest rate decisions can have a direct impact on your wallet. When buying a home, most people need to borrow the required funds in the form of a mortgage. The mortgage interest rate refers to the percentage a borrower pays to a lender on the funds borrowed for the purchase. Your lender determines your interest rate based on various factors such as credit risk, market conditions, and of course, the benchmark federal funds rate.
Your mortgage rate isn’t the same as the benchmark rate, but they are connected. The federal funds rate is set by the federal government at its scheduled meetings. It is used to influence the interest rates lenders offer on other types of loans—like mortgage loans. When getting a mortgage rate, lenders take into account the benchmark rate, alongside other factors like your debt-to-income ratio and credit score.
Now that you’re more educated on interest rates and how they may impact your home purchase and investment, you could be ready to start home hunting. Your REMAX agent will be there to guide you, every step of the way.
