The Federal Reserve cut interest rates by a quarter percentage point for the third time this year on Wednesday while projecting one more cut for 2026.
The central bank voted in a split decision to trim its benchmark interest rate to a range of 3.5% to 3.75%.
The decision drew dissents in opposing directions. Kansas City Fed president Jeff Schmid and Chicago Fed president Austan Goolsbee preferred to hold rates steady. On the other side, Fed governor Stephen Miran pushed to cut rates by a half percentage point, marking the first time since 2019 that three Fed officials voted against a policy action.
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Fed officials still see one more rate cut next year, the same number projected in September, as the job market has softened but inflation remains roughly a full percentage point above the central bank’s 2% goal.
“In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks,” officials said in their policy statement.
“Extent and timing” — words used earlier this year — were added back into their statement, reflecting the restraint officials will bring to future rate cut decisions.
Six members of the Fed would have preferred not to cut rates Wednesday. Looking ahead to next year, seven believe no cuts are needed in 2026, and three think the central bank is now below the level needed on its benchmark policy rate. Four members see one cut, four see two cuts, two see three cuts, one sees four cuts, and one sees six cuts.
Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments
Officials also revised their outlook for economic growth higher next year, with inflation expected to drop and the unemployment rate inching down.
Inflation is seen falling to 2.5% in 2026, compared with 2.6% previously projected, and a level of 3% to end 2025. GDP is seen rising 2.3% next year versus 1.8% previously, while GDP for this year was revised up a tenth of a percent to 1.7%. The unemployment rate is seen ticking down to 4.4% next year from 4.5% this year, the same as seen previously. The unemployment rate currently stands at 4.4%.
Officials will also resume purchases of short-term Treasurys as needed to maintain ample reserves for the banking sector and hold the balance sheet level.
Ahead of Wednesday’s meeting, economic data has been delayed due to the government shutdown that lasted all of October and into November. The latest reading of the Fed’s preferred inflation gauge, the Personal Consumption Expenditures index, was released with a two-month lag. For September, on a “core” basis excluding food and energy prices, inflation increased 2.8% in September, down a tenth of a percentage point from August.