The Federal Reserve on Wednesday slashed interest rates by a quarter point even as officials remained conflicted over whether to prioritize stubborn inflation or weakness in the labor market.
Although they did not reach a full consensus, central bankers lowered rates to a new range of 3.5% to 3.75% as they remained more concerned about underlying strain in employment.
Austan Goolsbee and Jeffrey Schmid opposed the cut, while Stephen Miran voted for a more aggressive half-point cut – a bigger-than-usual group of “no” votes that could make it difficult for the Fed to issue more cuts next year.
A slight change in the Fed’s policy statement also hinted at a slower rate-cut path.
The Fed said it would assess incoming data “in considering the extent and timing of additional adjustments” – though in previous months, it simply said, “in considering additional adjustments.”
Most officials had predicted the body would issue another quarter-point cut in 2026, the same as the September forecast.
The Fed also delivered a more upbeat outlook on the economy, projecting growth through 2026 – though they saw inflation remaining above their 2% goal over the next few years.
A mixed bag of data has shown inflation stubbornly above the Fed’s 2% goal, and while employers added outsize jobs in September, a prolonged hiring freeze pushed the unemployment rate to its highest level since October 2021.
The record-breaking government shutdown halted data collection, causing delays in the release of key economic reports. October’s unemployment rate, meanwhile, will never be published.
US stocks had a fairly muted reaction to the interest-rate cut. The Dow Jones Industrial Average jumped 276 points, or 0.6%, by about 2:18 p.m. ET, while the S&P 500 rose 0.4%. The Nasdaq ticked up less than 0.1%.
Policymakers have not reached a full consensus since their July meeting. Miran, President Trump’s former advisor, also voted for a more aggressive half-point cut at the Fed’s September meeting. Schmid, president of the Kansas City Federal Reserve, opposed a cut altogether.
President Trump is reportedly slated to start his final round of interviews this week for a new Federal Reserve chairman to replace Jerome Powell.
White House economic advisor Kevin Hassett is largely viewed as the frontrunner.
