Federal Reserve Lowers Interest Rate Amid Divisions and Economic Uncertainties
The Federal Reserve has lowered the target range for the federal funds rate by 0.25 percentage points to 3.50%–3.75%, marking the third cut this year and the lowest level in three years. However, the decision to cut rates was not unanimous. Three policymakers dissented: Austan Goolsbee and Jeffrey Schmid voted to maintain the current rate, while Stephen Miran advocated for a larger 0.50 percentage point cut.
Federal Reserve Chair Jerome Powell emphasized that policymakers will wait for incoming economic data to assess the impact of this year's three rate reductions. The next meeting is scheduled for January, which could influence the future path of monetary policy. According to the Fed's dot plot, the median expectation remains at one additional 0.25-point cut in 2026, unchanged from the September projection.
Despite the rate cuts, policymakers remain divided over the appropriate path forward due to unusual tensions between inflation and unemployment. The unemployment rate rose to 4.4% in September, while inflation stood at 3% during the same month. These figures were affected by a data blackout linked to the recent government shutdown.
President Trump has called for deeper rate cuts. Potential successors for the position of Fed chair include Kevin Hassett, considered the front-runner, along with Kevin Warsh, Christopher Waller, and Scott Bessent. Chair Powell stated that President Trump's views will not influence his decision-making.
