The Federal Reserve delivered a widely expected rate cut today, lowering its benchmark interest rate by a quarter point to 3.5%–3.75% while signaling a tougher road ahead.
The move came with unusual discord: three officials dissented (the most in five years), underscoring a deep split inside the central bank over whether inflation or the slowing labor market should take priority. New projections show only one rate cut penciled in for 2026 and another in 2027; seven Fed officials don’t expect any cuts next year at all.
Inflation remains stuck at 2.8%, well above the Fed’s 2% target, and officials don’t expect it to return to goal until 2028. Meanwhile, the labor market is showing mixed signals: official data has been delayed by the recent government shutdown, but private trackers are flashing warning signs, including more than 1.1 million announced layoffs so far this year.
The decision lands as Chair Jerome Powell nears the end of his term, with just three meetings left before President Trump appoints his successor — a choice that could shift the Fed toward more aggressive rate-cutting.
