Enda Curran
(Bloomberg) — Federal Reserve officials cut interest rates for a third consecutive time and maintained expectations for just one rate cut in 2026.
The Federal Open Market Committee voted 9-3 on Wednesday to lower the benchmark federal funds rate to a range of 3.5%-3.75%. It also subtly changed the wording of its statement to indicate greater uncertainty about when it would cut rates again.
The dissent and rate forecasts underscore divisions among policymakers over whether labor market weakness or stubborn inflation pose a greater threat to the U.S. economy.
In its October statement, the FOMC described factors it would consider “when considering additional adjustments to its benchmark.” In a statement on Wednesday, the committee returned to language it had used in December, just before it paused rate cuts, saying it was “considering the extent and timing of additional adjustments.”
The outcome marked the first time since 2019 that three officials voted against a policy decision, with dissent from both ends of the policy spectrum. The S&P 500 rose while U.S. Treasury yields and the dollar fell. There has been no major change in market expectations for an interest rate cut in 2026.
Two regional Fed presidents – Chicago’s Austen Goolsby and Kansas City’s Jeff Schmid – voted against the decision, preferring to keep rates on hold. Stephen Miran, the central bank governor appointed by Trump in September, again expressed his opposition and supported a deeper rate cut of half a percentage point.
Fed officials also authorized purchases of new short-term Treasury bills to maintain an “adequate” supply of bank reserves.
Federal Reserve Chairman Jerome Powell will hold a news conference in Washington at 2:30 p.m.
The decision to lower rates comes after disagreements at the committee came into public view in recent weeks. Following the last rate cut in October, several officials warned of persistent inflation, signaling their hesitancy to support another rate cut. Others remain concerned about labor market weakness and are calling for at least another rate cut.
The conflicting data helps explain why the FOMC has not voted unanimously since June.
The unemployment rate rose to 4.4% in September, up from 4.1% in June. But prices – according to the Fed’s preferred inflation measure – rose 2.8% in the year to September, still well above the central bank’s 2% target.
The government shutdown has delayed the release of key data, further complicating the policy outlook.
Investors expected a rate cut on Wednesday after New York Fed President John Williams, seen as close to Powell, expressed support for a December rate cut in a Nov. 21 speech despite the committee’s disagreements and economic uncertainty.
new forecast
In new economic forecasts, officials’ median forecast calls for one rate cut in 2026 and one in 2027. However, the outlook for interest rates remains deeply divided. Seven officials said they favored keeping rates steady through 2026, while eight expressed support for at least two officials.
Officials raised their median forecast for economic growth in 2026 to 2.3% from 1.8% in September. They also expect inflation to fall to 2.4% next year from 2.6% in September.
Not long ago, President Donald Trump said he had decided on who to nominate to replace Powell as Federal Reserve chairman and said he would announce the decision early next year. The White House has criticized the Fed for not cutting interest rates sooner, fueling concerns that the central bank’s independence is at risk.
Federal Reserve officials began approving purchases of new Treasury securities on December 12. Many Wall Street banks expected the move to be a way to support liquidity in overnight funding markets.
Since 2022 and until this month, the central bank has been reducing the size of its holdings of government bonds, aiming to achieve the smallest possible size without disrupting money markets.
—With help from Carter Johnson
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Last modified: December 10, 2025
