The US Federal Reserve has reduced interest rates for the third time this year, signaling cautious support for the economy while internal divisions raise questions about future cuts. The central bank lowered its key lending rate by 0.25 percentage points, placing it in a 3.50%–3.75% range — the lowest level in three years.
Despite the cut, policymakers remain divided over balancing a softening job market with persistent inflation. Economic projections from the Fed suggest a possible single rate cut next year, though new data could alter this outlook.
Fed Chair Jerome Powell emphasized the importance of patience, stating that central bankers need time to assess how the three rate reductions this year are influencing the economy. Officials plan to closely monitor incoming data ahead of the January meeting.
President Donald Trump, who has repeatedly urged for lower rates, expressed disappointment, suggesting the reduction could have been doubled. Powell described the current situation as “very challenging,” highlighting the difficulty of addressing rising inflation and unemployment simultaneously.
The recent decision to lower rates was not unanimous. Three Fed officials dissented: Stephen Miran supported a larger 0.5% cut, while Austan Goolsbee and Jeffrey Schmid voted to keep rates steady.
Data limitations caused by the longest US government shutdown have left policymakers with an incomplete economic picture. Recent Labor Department figures show the unemployment rate rose slightly to 4.4% in September. The Fed aims to stimulate the labor market by making borrowing cheaper for businesses.
Inflation remains above the 2% target, reaching 3% in September — the highest since January. Analysts note that while tariffs are pushing some prices higher, softer-than-expected inflation allows the Fed to prioritize job growth through rate cuts.
