Australian shares closed lower on Thursday, after the Federal Reserve cut its interest rate by 25 basis points and assured two more cuts later during the year.

The S&P/ASX 200 fell 0.8% or 73.3 points to close at 8,745.2.

The Federal Open Market Committee voted to cut interest rates from 4.25% to 4%, Bloomberg reported.

"The cut itself wasn't a huge surprise, though the combination of a dovish move with still-cautious guidance left investors in two minds," said Armina Rosenberg, co-founder and co-portfolio manager at Minotaur Capital in Sydney.

On the domestic front, the August labor force data for Australia showed a slight easing in the labor market, according to a report by ANZ Research.

Australia's seasonally adjusted unemployment rate remained steady at 4.2% in August, unchanged from July, data from the Australian Bureau of Statistics showed.

The Reserve Bank of Australia may deliver 25-basis-point cuts in November, February 2026, and May 2026, taking the cash rate down to a terminal rate of 2.85%, around the estimate of the neutral rate, according to a report by Rabobank.

In company news, Shares of Santos (ASX:STO) fell 12% at market close, after the consortium led by XRG, a unit of the Abu Dhabi National Oil Company, withdrew its non-binding proposal to acquire the company for $5.626 per share in cash.

Macquarie Group (ASX:MQG) was flat with a slight negative tilt at market close after Semafor reported on Wednesday that the company is in talks with Washington, D.C.-based investment firm Carlyle Group for a proposed acquisition to create a firm with combined assets exceeding $1 trillion.

Lastly, the Federal Court of Australia has ordered Qantas Airways (ASX:QAN) to notify affected passengers of their right to opt out of proceedings that alleged the airline enjoyed significant financial benefits at its customers' expense, according to a ruling by the Court.