Fed cuts interest rates cuts rates to 3.5–3.75% amid rare dissent, economic uncertainty

On Wednesday, the Federal Reserve reduced its benchmark interest rate by a quarter-point to a range of 3.5 to 3.75%, underscoring divisions among officials over the impact of rate cuts on inflation and employment. The Federal Open Market Committee (FOMC) approved the move by a 9-to-3 vote, a narrower margin than typical.

The dissenting votes included a Fed board member who preferred a 0.5 percentage-point reduction and two regional Fed presidents who opposed any cut. The high level of disagreement is uncommon; the last time there were three dissenting votes was in September 2019. The decision highlights the difficulty Fed leadership faces in maintaining consensus as the economy navigates uncertain conditions.

Fed officials are attempting to determine how quickly interest rates can return to neutral levels without undermining their efforts to control inflation. Price growth rose after the rapid decline in the final year of the previous administration and was further influenced by billions of dollars in tariffs.

At the same time, hiring in the U.S. has slowed, and the unemployment rate has risen, eroding consumer confidence.

While some FOMC members view the inflationary effects of tariffs as temporary, others remain concerned about cutting rates while inflation remains well above the Fed’s 2% annual target. Additionally, decision-making has been complicated by a lack of federal data for October, due to the government shutdown that closed the Bureau of Labor Statistics and prevented the collection of employment and consumer price index data.

The narrow vote also reflects the broader uncertainty about the direction of U.S. monetary policy. Notably, President Trump could name a successor to Fed Chair Jerome Powell in the coming days or weeks, a decision that may further influence future rate policy.

As Fed officials continue to balance the dual priorities of controlling inflation and supporting economic growth, the nation’s economy faces a complex mix of slowing job gains, rising unemployment, and lingering trade-driven inflation.