The US Federal Reserve lowered interest rates by another quarter percentage point on Wednesday, marking its third reduction this year and shifting the federal funds target range to 3.50%–3.75%. The move signals continued caution from policymakers as they navigate a slower economy and moderating inflation heading into 2026.
The decision exposed an unusually wide divide inside the Federal Open Market Committee. Kansas City Fed President Jeff Schmid and Chicago Fed President Austan Goolsbee argued for keeping rates unchanged, suggesting concerns that easing too quickly could undermine the Fed’s inflation-fighting progress. In contrast, Fed Governor Stephen Miran backed a larger half-point cut, the strongest dovish stance on the committee. This marks the first meeting since 2019 in which three officials publicly dissented from a policy action.
With three rate cuts already delivered in 2025—totaling 75 basis points—officials appear more restrained about the outlook for next year. Projections continue to point to just one additional cut in 2026, unchanged from the forecast released in September.
Internal views for 2026 remain highly dispersed, underscoring persistent uncertainty around the economic path. Seven officials do not expect any cuts at all next year, while three members believe the current benchmark rate has already fallen below its appropriate level. At the same time, four policymakers anticipate one cut, another four expect two, two foresee three cuts, one projects four reductions, and one envisions as many as six cuts.
The mixed signals highlight the Fed’s challenge in balancing easing momentum with longer-term policy discipline as it approaches the final stretch of its post-pandemic normalization cycle.
