US Fed cuts rates by 25 basis points with three dissenting votes
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The news: The US Federal Reserve has cut interest rates by 25 basis points for the third consecutive time, bringing the benchmark target range to 3.5%-3.75% with the FOMC voting 9 to 3 in favour of the move.
The context: It is the first time since 2019 that three officials dissented on a policy decision.
It comes amid deep divisions among policymakers over whether stubborn inflation or weakening labour market conditions pose a greater risk.
The vote was split, with dissent from Fed Governor and Trump adviser Stephen Miran, who has pushed for a larger 50 basis-point cut. Chicago Fed President Austan Goolsbee and Kansas City’s Jeffrey Schmid voted to keep rates unchanged.
It comes as Trump is expected to soon announce Powell’s replacement, with economic adviser Kevin Hassett seen as the frontrunner.
The numbers: The decision was accompanied by updated economic projections, setting a baseline outlook for Powell’s successor ahead of his term ending in May.
Those point to one 25 basis point cut in 2026 and one more in 2027. Growth in 2026 was revised up to 2.3% from 1.8%, and next year’s core inflation forecast was lowered to 2.5%
Those forecasts may prove short-lived, with delayed labour and inflation data that was held up by a 43-day government shutdown, due in coming days.
The Fed’s preferred core inflation reading was 2.8% at last measure, above its 2% goal. Unemployment was 4.4% in September (also up from 4.1% in June).
The sources: US Federal Reserve, Bloomberg, Reuters
