The U.S. Federal Reserve has cut interest rates for the third time this year, lowering the benchmark to a range of 3.50% to 3.75%, marking its lowest level since 2022. This move aims to support the economy amid mixed signals, but sharp divisions within the Fed leave future cuts uncertain.
Chair Jerome Powell stressed the need to assess the impact of this year’s cuts, saying, “We are well-positioned to wait to see how the economy evolves.” The upcoming economic data will be crucial before decisions at the January meeting.
The decision was not unanimous. Stephen Moore favoured a larger 0.5 percentage point cut, while Austan Goolsbee and Jeffrey Schmid voted to keep rates steady. This split reflects tension between concerns over a slowing labour market and inflation that remains above the 2% target, reaching 3% in September.
Inflation pressures partly stem from tariffs imposed earlier in the year, which have raised consumer costs. Meanwhile, unemployment rose slightly to 4.4% in September, signalling a softer jobs market.
President Donald Trump criticised the modest rate cut, suggesting it should have been “at least doubled,” and called for the U.S. to have “the lowest rates in the world.”
Looking ahead, the Fed’s “dot plot” forecasts one more rate cut in 2026, but this could change with new data. The leadership transition adds to uncertainty, as Trump considers Kevin Hassett, a close adviser, to replace Powell when his term ends in May.
Experts warn that the new chair must balance independence with alignment to the administration to avoid unsettling markets. Powell dismissed suggestions that the leadership search affects his policy decisions, saying “no.”
The Fed continues to navigate economic challenges with caution, balancing support for growth against the risk of rising inflation amidst internal disagreements and leadership uncertainty.