• Fed cuts rates for third straight meeting, lowers benchmark to three-year low
• Rare three-way split underscores internal debate over inflation vs. jobs
• Officials signal higher bar for any further reductions
Federal Reserve officials lowered interest rates for the third consecutive meeting on Wednesday, but signaled they’re in no hurry to cut further as divisions widen inside the central bank over what poses the bigger threat — stubborn inflation or a weakening job market.
The policy committee voted 9–3 to approve a quarter-point reduction in the benchmark federal-funds rate, bringing it to a range of 3.5% to 3.75%, its lowest level in three years. It marked the first time since 2018 that three officials dissented on a single rate decision, highlighting the challenge of navigating an economy showing mixed signals.
The action should make home mortgages a bit more affordable. Home affordability has been improving lately as home prices dip in some markets and mortgage rates continue to fall closer to the 6% level. Freddie Mac reported its latest Primary Mortgage Market Survey showed the 30-year fixed-rate mortgage (FRM) averaged 6.19% last week.
“Mortgage rates decreased for the second straight week as we emerged from the Thanksgiving holiday,” said Sam Khater, Freddie Mac’s chief economist. “Compared to this time last year, mortgage rates are half a percent lower, creating a more favorable environment for homebuyers and homeowners.”
Three dissenters highlight conflicting priorities
Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeff Schmid argued the rate cut wasn’t justified, pointing to stalled progress on inflation. Fed governor Stephen Miran, however, wanted a more aggressive move, favoring a half-point reduction to guard more forcefully against a slowdown in hiring.
The unusually split vote underscored a broader debate within the central bank: whether to keep pressure on inflation that has stopped easing or move more decisively to support a labor market showing early signs of cooling.
Officials set higher bar for additional cuts
Wednesday’s move was designed to insure against a sharper-than-expected drop in employment growth. But officials made clear that further reductions aren’t guaranteed. Their postmeeting statement said the “extent and timing” of future cuts would depend on how the economic outlook evolves — language reminiscent of the Fed’s pivot to the sidelines after a round of cuts last year.
With inflation no longer improving and hiring softening only gradually, policymakers suggested they need clearer evidence of labor-market deterioration before taking rates lower again.
Outlook: cautious path ahead
The Fed’s calibrated message signals a central bank attempting to balance two risks at once: cutting too little and allowing a jobs downturn to accelerate, or cutting too much and allowing inflation pressures to reignite. For now, officials appear content to pause and watch incoming data, even as internal disagreements make the next steps less predictable.