The Federal Reserve is expected to pause further interest rate cuts this year as the U.S. economy shows signs of steadying after the end of a record 40-day government shutdown.
Policymakers cut rates twice earlier in 2025 to cushion the economy from fiscal gridlock and slowing growth. With the shutdown resolved and key indicators improving, officials are likely to hold rates steady when they meet in December.
Recent data suggest the job market remains resilient. Hiring has slowed but continues at a healthy pace, and unemployment is holding near 4 percent. Inflation has eased from last year's highs but remains slightly above the Fed's 2 percent target, giving the central bank little reason to ease further.
Financial markets are adjusting to the shift. Treasury yields have risen as investors scale back expectations for another rate cut this year. Major stock indexes closed higher Monday, reflecting confidence that the economy is stabilizing as federal operations return to normal.
The shutdown, the longest in U.S. history, disrupted pay for federal workers and delayed the release of key government data. Economists expect a rebound in federal spending and consumer activity to lift fourth-quarter growth modestly.
Globally, the Fed faces mixed signals. Slower manufacturing in China and volatility in oil markets could weigh on exports and prices. Even so, most analysts say domestic demand remains strong enough to support moderate growth into early 2026.
For now, the Fed appears content to wait. The central bank is watching to see how inflation and employment evolve in the coming months before making any new moves.
With the shutdown over, inflation cooling and the job market firm, officials have gained something rare after months of uncertainty: time to pause and watch how the economy responds.
