Fed cuts interest rates for second time and predicts third

(laichau.gov.vn) The US Federal Reserve (Fed) cut interest rates for the second time this year, by 25 basis points (0.25%).

US Federal Reserve Chairman Jerome Powell at a press conference on September 17. Photo: Reuters

On October 30, after a two-day policy meeting, the Fed decided to cut its benchmark interest rate by another 25 basis points. This decision matched market expectations and was the second time the agency adjusted its monetary policy this year.

Policymakers voted 10-2 to lower the key lending rate range to 3.75%-4.00%, according to a Fed statement.

The two dissenting members were Governor Stephen Miran, who favored a more aggressive cut of 0.5 percentage points, and Kansas City Fed President Jeff Schmid, who "wants to keep rates where they are."

The Fed chairman said job growth had "slowed significantly" since the start of the year, blaming lower immigration and lower labor force participation in part. He also said that "increased import tariffs have pushed up prices for many goods, causing inflation to edge up."

Still, Powell hinted that investors should not expect a rate cut in December. "At this meeting, there were clear differences of opinion on the direction of December. Further rate cuts later this year are not certain," he said.

After Powell's remarks, investors placed a 71% chance of a December rate cut, up from 90% previously.

Market reaction

The decision is expected to boost the US economy as businesses are hit by reciprocal tariffs imposed by President Donald Trump on a large scale, while also giving policymakers more time while the federal government remains shut down.

The US stock market reacted mixedly after the Fed decided to cut interest rates for the second time this year. While the Nasdaq index set a new record, the other two indexes, the S&P 500 and Dow Jones, recorded slight declines.

At the end of the trading session on October 29, the S&P 500 index fell slightly by 0.3 points to 6,890.59 points, the Dow Jones Industrial Average fell by 74.37 points (equivalent to a decrease of 0.16%). In contrast, the Nasdaq composite index - where technology stocks are concentrated - increased by 0.5%, reaching 23,958.47 points, setting a new record.

The highlight of the session was Nvidia (NVDA) shares, which surged to a record high after President Trump said he might mention Nvidia’s Blackwell AI processor during his meeting with Chinese President Xi Jinping on October 30. The surge pushed the AI ​​chipmaker’s market capitalization past $5 trillion, making Nvidia the first company in history to reach that milestone.

Investors now expect the Fed to cut interest rates by another 0.25% at its meetings in December this year and March 2026.

The political stalemate between Republicans and Democrats has lasted nearly a month since the government shutdown, leaving most official economic data unreleased.

The Fed also announced that it would end its balance sheet reduction policy on December 1. The Fed's balance sheet expanded during the early stages of the COVID-19 pandemic and has been shrinking in recent years.

Updated October 30, 2025

Source: https://laichau.gov.vn/tin-tuc-su-kien/chuyen-de/tin-trong-nuoc/fed-giam-lai-suat-dot-2-va-du-doan-dot-3.html