By Xie Zheshu, Liu Yanan

WASHINGTON, Dec. 10 (Xinhua) -- The U.S. Federal Reserve on Wednesday decided to lower the target range for the federal funds interest rate by 25 basis points to 3.5 to 3.75 percent, marking its third rate cut this year.

The decision was approved by a 9-3 majority vote of the Federal Open Market Committee (FOMC), marking the first three-dissent meeting since September 2019, which highlighted the committee's internal divisions on the pace of monetary easing.

WIDELY ANTICIPATED CUT

The latest move was widely anticipated before the announcement, with market-based probabilities at around 89 percent for the 25-basis-point reduction, as indicated by the CME FedWatch Tool.

"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," said the FOMC in a statement.

The FOMC highlighted that economic activity has continued to expand at a moderate pace, with job gains slowing this year and the unemployment rate edging up through September.

It added that inflation has moved up since earlier in the year and remains somewhat elevated, underscoring the committee's long-term goal of achieving 2 percent inflation over the longer run.

LABOR MARKET FACES CHALLENGES

The slowdown in job creation and rise of unemployment rate in recent months in the United States prompted the Fed to resume cutting rates in September, though inflation remained near 1 percentage point higher than the Federal Reserve's target of 2 percent.

Data recently issued by Automatic Data Processing, Inc. (ADP) showed that U.S. private companies cut 32,000 workers in November, defying economists' expectations for an increase of 40,000 for the month.

U.S. unemployment trends show particular strain among young people and minorities, with experts describing the labor market as an "exclusive club" where insiders fare well but outsiders struggle to enter.

Small businesses with fewer than 50 employees lost 120,000 jobs in November, while mid-sized and large establishments continued to add jobs in the period, according to ADP.

SHUTDOWN IMPACTS LINGER

Policymakers in the United States face extraordinary challenges as the 43-day federal government shutdown not only worsened the job market but also disrupted the collection of macroeconomic data.

The prolonged government shutdown in late 2025 delayed critical surveys and data compilations, creating gaps in real-time economic data that the Fed relies on for informed decision-making.

Fed Chair Jerome Powell mentioned the shutdown multiple times during his post-meeting press conference, noting its role in delaying inflation data since October and slowing economic activity in October and November.

"Very little data on inflation has been released since our meeting in October," said Powell.

The U.S. Bureau of Labor Statistics is scheduled to release the employment data for November on Dec. 16, and the unemployment data for October will not be available due to the government shutdown in October and early November.

These forthcoming releases are expected to provide further clarity on employment trends, though analysts caution that revisions may be necessary due to incomplete data from the shutdown period.

RATE-CUT PAUSE EXPECTED

Looking ahead, the Federal Reserve emphasized a data-dependent approach.

"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," said the FOMC in the statement.

The language was seen as a signal that the Fed would likely pause rate cuts for some time.

Powell described the current stance as placing the Fed "well positioned to wait and see how the economy evolves."

"With the jobs part of the Fed's mandate looking more troubling ... we see the Fed cutting rates twice in 2026 with 25bp cuts forecast for March and June," said ING bank in a note on Wednesday. ■