Divided Fed approves third rate cut this year, sees slower pace ahead

Fulfilling expectations of a “hawkish cut,” the central bank’s Federal Open Market Committee lowered its key overnight borrowing rate by a quarter percentage point, putting it in a range between 3.5%-3.75%.

However, the move carried caution flags about where policy is headed from here and featured “no” votes from three members, which hasn’t happened since September 2019.

The 9-3 vote again featured hawkish and dovish dissents – Governor Stephen Miran favored a steeper half-point reduction while regional Presidents Jeffrey Schmid of Kansas City and Austan Goolsbee of Chicago backed holding the line. In Fed parlance, hawks are generally more concerned about inflation and favor higher rates while doves focus on supporting the labor market and want lower rates.

On the economy, the committee raised its collective view of gross domestic product growth for 2026, boosting its September projection up by half a percentage point, to 2.3%. The committee continues to expect inflation to hold above its 2% target until 2028.

On inflation, prices remain stubbornly high, with the Fed’s preferred gauge putting the annual rate at 2.8% in September, the most recent month for which data is available. While that’s considerably off the peaks of a few years ago, it’s still well north of the central bank’s 2% target.

What data they have seen has indicated a low-hire, low-fire labor market, with employers reluctant both to add to payrolls or to lay off large numbers of workers. However, recent signs from unofficial data point to heavier jobs reductions to come, with announced layoffs through November topping 1.1 million, according to employment placement firm Challenger, Gray & Christmas.

https://www.cnbc.com/2025/12/10/fed-interest-rate-decision-december-2025-.html