Fed cuts interest rates by a quarter point amid apparent split over US economy | Federal Reserve

The U.S. Federal Reserve said Wednesday it was cutting interest rates by a quarter point for the third time this year, as the embattled central bank appeared divided over how best to manage the U.S. economy.

Fed Chairman Jerome Powell emphasized unity within the Federal Open Market Committee (FOMC), the board of Fed leaders that sets interest rates. But nine to three voted to lower rates to a range of 3.5% to 3.75%. has sparked discord within the committee which tends to vote unanimously.

New projections from officials also suggest a hesitation to cut rates further next year, a refusal that could increase divisions between the Fed and the White House.

The split highlights the general uncertainty at the Fed as the U.S. economy absorbs significant economic upheaval, including tariffs, workforce changes due to Trump’s immigration crackdown and massive government budget cuts. Complicating the task for Fed officials is the lack of comprehensive price and labor market data, the collection of which was halted during the government shutdown. And Trump is considering his choice to replace the Fed chairman.

The latest economic data showed slight increases in both inflation, which rose from 2.3% in April to 3% in September, and unemployment, which rose from 4% in January to 4.4% in September.

These two increases, although relatively modest, place the Fed in a difficult situation. Keeping rates too high could cripple the economy, but lowering them too quickly could lead to higher inflation.

Earlier this year, Fed officials said they were waiting to see the impact of Donald Trump’s tariffs on prices before changing interest rates, pausing a rate-cutting campaign that began last fall.

For months, Trump and his allies in the White House have publicly attacked Fed officials — typically, U.S. presidents respect the nonpartisan nature of the central bank — for failing to lower interest rates. Even with rising inflation, Trump has continued to insist that any price increases are a legacy of Joe Biden’s presidency, even as some business executives say their price increases are directly attributed to tariffs.

Trump has been calmer toward the central bank since September, when officials cut rates by a quarter point, and then again at their October meeting. Last month, Powell said officials weren’t making cuts because they were convinced prices were falling. Instead, authorities were increasingly concerned about the labor market, with fewer and fewer jobs being created in the economy each month.

“There is no risk-free policy path as we navigate this tension between our employment and inflation goals,” Powell said at the time.

Minutes from the October meeting described “very divergent views” on how policymakers should move forward at that December meeting. The notes described how some participants believed a cut would be appropriate to return rates toward “policy neutral over time,” while others believed current economic conditions did not warrant rate changes.

In a speech last month, Tom Barkin, president of the Richmond Fed, said that “without compelling data, it’s actually difficult to get people who have pre-existing views to come to a consensus.”

“You could discuss it, and maybe that’s what we’ll do,” he said.

Next year, Powell’s term as president will end in May, leaving room for Trump to nominate his pick for the nation’s most influential economic role. Trump has suggested that Kevin Hassett, the director of the National Economic Council, could be his nominee, although it is unclear how popular Hassett is among other Republicans.

Hassett told Fox News on Wednesday that Trump would finalize his choice in the coming weeks.