The Federal Reserve cut its benchmark interest rate by a quarter-point on Wednesday, the third consecutive reduction, bringing it to about 3.6%.
However, the central bank signaled a likely pause in this easing cycle, a move that may conflict with President Donald Trump’s persistent demands for deeper cuts.
Following its policy meeting, the Fed indicated that no further rate changes are anticipated in the coming months. Officials’ own economic projections suggest just one additional cut may be appropriate for all of next year.
The decision revealed significant internal disagreement, with three officials dissenting—the most in six years. Two preferred to hold rates steady, while Trump appointee Stephen Miran advocated for a larger half-point cut.
These divisions reflect a fundamental split within the Fed between those focused on supporting the job market and those prioritizing the fight against inflation, which remains above the Fed’s 2% target.
Chair Jerome Powell emphasized a cautious, data-dependent approach at a post-meeting press conference.
“We will carefully evaluate the incoming data,” Powell stated, noting the Fed is “well positioned to wait to see how the economy evolves.” He explicitly ruled out raising rates but signaled the Fed is in no hurry to cut further.
The Fed’s next move will be informed by key economic trends: a slowdown in job gains, an unemployment rate that has risen to 4.4%, and persistently elevated inflation.
A backlog of economic data, delayed by the recent government shutdown, will be available before the Fed’s next meeting in late January, providing clearer guidance.
The central bank also faces potential external pressure.
Trump has stated that supporting immediate rate cuts is a “litmus test” for his next Fed Chair nominee, whom he may name soon to replace Powell when his term ends in May. This sets the stage for continued political tension over the direction of U.S. monetary policy.