Fed Delivers Second Consecutive Cut in 2025
Posted on November 10, 2025
The Federal Reserve (Fed) delivered a widely anticipated 25 basis-point rate cut on October 29th, lowering the federal funds rate to a target of 3.75% to 4.00%. In addition, The Fed also announced the conclusion of its quantitative tightening (QT) program on December 1st, signaling it will reinvest maturing Treasuries and mortgage-backed securities (MBS) runoffs into Treasury bills. Fed Chair Jerome Powell surprised markets with his hawkish remarks that a further cut to rates in December was “not a forgone conclusion”.
At the September Meeting, the Fed’ Summary of Economic Projections (SEP or dot-plots) signaled expectations for two additional rate cuts by year-end, reflecting a softening labor market as the more immediate concern relative to stubborn inflation levels. As part of this dual mandate—promoting both price stability and maximum employment—the Fed must now navigate through a considerable fog, as economic data releases have been halted along with the rest of the Federal government, during what has become the longest shutdown in US history.
The Administration called back select government employees to release the September CPI report, on October 24th, which revealed inflation as reasonably anchored and below expectations, cementing the case for their most recent rate cuts. Meanwhile, the slow-to-hire, slow-to-fire character of the post-covid job market has given way to increased corporate layoff announcements. Over the past month some of the largest companies, such as UPS, Amazon, Intel, Accenture, Ford, PwC, and Target, have collectively announced more than 150,000 of job cuts, highlighting a shifting labor market. The lack of timely economic data due to the shutdown—such as the last two labor reports—has forced the Fed to rely on alternative, third-party data in its deliberations, which certainly could result in policy errors. Chair Powell put it best: there is no risk-free path ahead.
Takeaway:
Given the balance of risks to employment against the backdrop of high but currently stable inflation, the Fed is likely to maintain their current easing trajectory with another potential 25 basis point cut to the Federal Funds rate on December 10. But given the scarcity of good data and the degree of discord on the Committee (two dissenting votes occurred), this outcome is hardly certain.
Despite continued stretched valuations across all asset classes, we continue to view fixed income as an attractive opportunity for both safety and income in your portfolio, with Investment Grade Bond Yields at near 4.82% and High Yield bonds around 6.78%.
Miles Toth
Vice President, Portfolio Manager
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