Fed Cuts Interest Rates For A Third Meeting In A Row

The Federal Reserve lowered borrowing costs Wednesday to boost hiring, but it could be the last rate cut for some time.

As widely expected, the Federal Reserve’s starkly divided policy committee cut the central bank’s key interest rate by a quarter-point Wednesday. The cut puts the range at 3.5% to 3.75%, its lowest since November 2022, and prioritizes helping the job market over fighting inflation. Three of the 12 Federal Open Market Committee members dissented from the decision, with one preferring a steeper half-point cut, and two voting to keep the rate flat. It was the most dissents since September 2019.

Fed Governor Stephen Miran, a Trump appointee, favored the sharper cut, while Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeffrey Schmid voted to keep it flat.

The split decision reflects the dilemma the Fed faces in pursuing its dual mandate from Congress to keep inflation low while maintaining high employment. President Donald Trump’s tariffs and other economic policies have kept inflation running above the Fed’s target of a 2% annual rate, while slowing the labor market. Uncertainty about trade policy has led businesses to delay expansion and hiring plans, contributing to the slowdown.

“In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks,” the committee said in a statement.

In recent weeks, the committee has split into two distinct camps: one believes the slowing labor market poses the greater risk to the economy, while the other believes there’s a greater danger of reigniting high inflation.

The Fed can only address one of those concerns at a time: keeping the fed funds rate higher for longer raises borrowing costs on short-term loans, reducing demand and pushing down inflation; while a lower one does the opposite, boosting demand and hiring but potentially stoking inflation.

Fed officials have said they would like to move the rate to a “neutral” position that maintains stability, but disagree about what that rate would be.

The Fed made its decision without much of the data upon which it usually relies. Key reports on inflation and the job market were delayed by the government shutdown and are not scheduled to be published until next week.

Fed officials also made their quarterly projections for the economy, and with little new official data to go on, they were little changed from their last set of projections in September. Fed officials now expect slightly lower inflation, at 2.4% in 2026 as measured by PCE in 2026, and higher economic growth, with the GDP rising 2.3% in 2026 instead of 1.8%.