The Federal Reserve lowered its benchmark interest rate Wednesday by a quarter-percentage point in a 9-3 vote.
The Federal Open Market Committee’s decision brought the federal funds rate to a range of 3.5% to 3.75%, the lowest level in nearly three years. It marked the third consecutive rate reduction this year and the fourth straight meeting without a unanimous vote.
Fed Governor Stephen I. Miran dissented in favor of a larger half-point cut, while Chicago Fed President Austan D. Goolsbee and Kansas City Fed President Jeffrey R. Schmid opposed any reduction, preferring to hold rates steady. Schmid’s no-cut stance aligned with his October vote.
The narrow margin underscored the challenges facing Fed Chair Jerome Powell in forging consensus amid economic uncertainty. Powell, who steers the 12-member panel toward agreement while allowing for public dissent through projections and speeches, now confronts a landscape where inflation lingers above the 2% target even as hiring slows.
Price increases, which had eased sharply in the last year of the Biden administration, accelerated after President Donald Trump took office and rolled out sweeping tariffs worth billions. At the same time, U.S. job growth has decelerated markedly, lifting the unemployment rate and eroding consumer sentiment.
Such splits are uncommon; the last time three members opposed an FOMC action was in September 2019, when the Fed eased monetary policy to reverse prior hikes against inflation that failed to materialize.
Officials grapple with how swiftly to return rates to neutral without reigniting price pressures. Many worry about easing too soon, given elevated inflation, particularly after the Fed’s delayed response to the post-pandemic surge. Yet, minutes from the October meeting revealed roughly half the panel views tariff-fueled inflation as fleeting and urged continued cuts amid labor market strains.
Compounding the debate, a federal government shutdown halted the Bureau of Labor Statistics in October, delaying key employment and consumer price index data. Policymakers relied on internal surveys, community outreach, and private sources for insights.
The Fed’s latest projections held steady from September, with the median forecast calling for one more quarter-point cut in 2026. Inflation is seen dipping to 2.4% by year-end next year, alongside 2.3% economic growth — up from prior estimates — and a steady 4.4% unemployment rate.
“In considering the extent and timing of additional adjustments to the target range for the federal funds rates, the Committee will carefully assess incoming data,” the FOMC stated, per Reuters, wording that has historically hinted at a policy pause — diverging from trader bets for two reductions next year.
Futures markets now reflect an 78% chance of no change in January, up from 70% before the decision, with the policy rate projected at 3.1% by late 2026.
The vote comes as Trump ramps up criticism of the Fed and weighs naming Powell’s successor in the days or weeks ahead.
