The EUR/USD pair saw a volatile upward swing on Wednesday after the Federal Reserve made its third straight interest rate cut. The fiber pair tested its highest intraday bid in nearly a week before falling back into the mid-range for the day after a cooler-than-expected appearance from Federal Reserve Chairman Jerome Powell.
Fed Chair Powell gave a dovish press conference after the Fed’s interest rate call, noting that a third straight rate cut leaves the Fed in a “comfortable” position to play wait-and-see for more data before making any tougher decisions on interest rate moves moving forward. Despite the Fed’s broadening of its outline of interest rate expectations, the FOMC’s interest rate forecasts remain largely unchanged from the previous iteration, with the average policymaker expecting just one rate cut in 2026 and a subsequent cut in 2027 before interest rates normalize near their long-term level of around 3.0%.
The Federal Open Market Committee (FOMC) voted nine to three in favor of another quarter-point cut in interest rates, with one policymaker favoring a 50-basis-point cut and two voters opting for no cuts at all. This is the first time since 2019 that at least three FOMC policymakers have expressed explicit opposition to the 2019 rate cut consensus.
Read more about Fed Chairman Powell’s press conference
EUR/USD 5-minute chart
Economic indicator
Federal interest rate decision
the Federal Reserve The Federal Reserve deliberates on monetary policy and decides on interest rates at eight pre-scheduled meetings annually. It has two mandates: keeping the inflation rate at 2%, and maintaining full employment. Its main tool for achieving this end is setting interest rates – at which banks lend and banks lend to each other. If it decides to raise interest rates, the US dollar (USD) tends to strengthen because it attracts more foreign capital inflows. If they lower interest rates, they tend to weaken the US dollar while draining capital to countries that offer higher returns. If interest rates are left unchanged, attention turns to the tone of the FOMC statement, and whether it is hawkish (expecting interest rates to rise in the future), or dovish (expecting interest rates to fall in the future).
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Latest version:
Wednesday 10 December 2025 at 19:00
repetition:
irregular
actual:
3.75%
consensus:
3.75%
former:
4%
source:
Federal Reserve
Frequently asked questions about interest rates
Interest rates are charged by financial institutions on loans made to borrowers and are paid as interest to savers and depositors. They are affected by base lending rates, which are set by central banks in response to changes in the economy. Central banks typically have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below the target, the central bank may lower key lending rates, with the aim of stimulating lending and boosting the economy. If inflation rises significantly above 2%, this usually results in the central bank raising key lending rates in an attempt to reduce inflation.
Higher interest rates generally help strengthen a country’s currency because they make it a more attractive place for global investors to put their money.
High interest rates generally affect the price of gold because they increase the opportunity cost of holding gold rather than investing in interest-bearing assets or putting cash in the bank. If interest rates are high this usually causes the price of the US dollar (USD) to rise, and since gold is priced in dollars, this has the effect of lowering the price of gold.
The federal funds rate is the overnight interest rate at which U.S. banks lend to each other. It is the key rate that is frequently set by the Federal Reserve at FOMC meetings. It is set as a range, for example 4.75%-5.00%, although the upper limit (in this case 5.00%) is the quoted figure. Market expectations of the future federal funds rate are tracked by the CME FedWatch tool, which maps how many financial markets will behave in anticipation of the Federal Reserve’s future monetary policy decisions.
