Author: Siegmund Skalar | Source: Finanz und Wirtschaft | Publication Date: 29.10.2025 | Summary Reading Time: 3-4 minutes
Executive Summary
The US Federal Reserve has cut interest rates by 0.25 percentage points to 3.75-4% as expected, but Fed Chair Powell significantly dampened expectations for another rate cut in December. Despite trade wars and tariff offensives, the US economy shows surprising strength, particularly in consumer spending, which lifted GDP growth in the second quarter to 3.8%. The next rate cut is hanging in the balance, as the economic situation proves more stable than expected.
Core Theme & Context
The Fed continues its rate-cutting course that began in September, but is responding more cautiously than the market expected. The reason is the surprising resilience of the US economy to the feared negative impacts of current trade policy. The central bank is navigating between a weakening labor market and robust economic growth.
Key Facts & Figures
• Interest rate cut by 0.25 percentage points to range of 3.75-4% • Q2 GDP growth: Surprising 3.8% (expected for Q3: 3.9%) • Consumer spending increased by 2.5% - stronger than projected • Two dissenting votes in Fed decision (unusual at both ends of the spectrum) • Balance sheet tightening will end in December after 3.5 years • Repo rate rose to over 4.3% - signal of liquidity shortage • Market had previously priced in two more rate cuts by mid-2026
Stakeholders & Affected Parties
Directly affected: Financial market participants, borrowers, US companies, international investors Industries in focus: Technology sector (AI-related layoffs), pharmaceutical sector (benefits from Trump deals), defense industry, semiconductor suppliers Labor market: Government employees (Doge cuts), tech workers, structural bottlenecks due to tightened migration policy
Opportunities & Risks
Opportunities: • Stable economic situation despite geopolitical tensions • Robust consumer spending sustainably supports growth • Pharmaceutical sector and reshoring themes offer investment opportunities
Risks: • Inflationary tendencies not yet fully under control • Labor market remains critical uncertainty factor • Data uncertainty due to government shutdown complicates forecasts • Possible overheating with continued loose monetary policy
Action Relevance
Immediate impacts: US stock indices turned moderately negative after Powell's statements Strategic implications: • December rate cut "not a done deal" - markets must adjust expectations • Fed signals data-dependent, more gradual approach • Sector rotation towards pharma, infrastructure and defense recommended
Time-critical: Next Fed meeting in December will be decisive for further interest rate course
References
Primary source: • Fed-Analyse zu Zinsentscheid - Finanz und Wirtschaft
Supplementary sources: • Federal Reserve Official Statement - Fed.gov • US Economic Data - Bureau of Economic Analysis • Atlanta Fed GDPNow Forecast
Verification status: ✅ Facts checked on 29.10.2025
Note: Market dynamics can change quickly. Next critical data points are labor market data and inflation figures before the December meeting.