"On December 10, 2025, the Federal Reserve announced a quarter-percentage-point rate cut, bringing the benchmark rate to the 3.5%-3.75% range. This was both the final rate cut and the final Fed meeting of 2025, so the Fed ended up delivering a total of three rate reductions over the course of this year. This means 2025 ends with the benchmark rate three-quarters of a percentage point lower than the 4.25% to 4.50% target rate we started the year with."
"The rate cut is a small one, but with big implications for the economy as a whole, as it could impact the cost of borrowing, savings account and bond rates, and the stock market. The Fed's decision is also an important economic indicator that provides insight into how the central bank board members view trends in the broader economy as a whole."
"Social Security retirees need to pay attention to these interest rate decisions because the December rate cut - and future Federal Reserve decisions on interest rates in the coming year - could have a major impact on the Cost of Living Adjustments (COLAs) retirees are eligible for. How the Fed's rate cut affects the Social Security Cost of Living Adjustment For many Social Security retirees, Social Security benefits are their most important income source."
The Federal Reserve reduced its benchmark rate by 0.25 percentage points on December 10, 2025, ending the year with a 3.5%-3.75% target after three cuts totaling 0.75 percentage points. The lower rate can influence borrowing costs, savings account yields, bond rates, and equity markets while signaling the central bank's view of economic trends. Social Security retirees may see indirect effects because COLAs can be influenced by macroeconomic conditions tied to interest rates. Social Security benefits remain a primary income source for many retirees and families, and benefits have lost purchasing power, now worth about $0.80 on the dollar versus 2010. COLAs use the CPI-W measure, which is based on the spending patterns of urban wage earners and clerical occupations and may not reflect retiree inflation.
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