The Federal Reserve lowered its benchmark interest rate by a quarter point on Oct. 29, from 4% to 3.75%, The Wall Street Journal reported. To stop quantitative tightening by Dec. 1, the move implies a shift in emphasis from managing inflation to maintaining stability in the short-term financing markets.

This action was taken in the midst of a brief data blackout from a cyber intrusion that restricted access to important federal information.

The decrease, which comes after market and political pressure for looser policy, was the Fed’s second straight cut of the year. The market’s response was unequal despite the adjustment. 

Lenders recalculated long-term funding costs and mortgage rates surged back to 7%. While inflation in advanced nations is predicted to stay above 2% through 2027, global growth is predicted to fall from 3.2% this year to 3.1% in 2026, according to the International Monetary Fund’s October 2025 World Economic Outlook. The rate move prioritizes preserving reserve stability as the global economy cools down.

The Fed’s balance sheet reduction program’s termination might have more significant effects on markets than just the rate cut.

According to analysts, the U.S. Treasury Department may have more freedom to control debt issuance if quantitative tightening is stopped without causing financing difficulties in overnight markets. The Fed successfully buffers liquidity at a time when money market rates have begun to show early indications of pressure by limiting the outflow of assets.

When combined, this suggests a change in the factors influencing financial circumstances. The operational mechanism of policy transmission currently seems to be liquidity rather than the nominal level of rates. For borrowers, this implies that even during a period of cost-cutting, lending cost volatility may continue.