The atmosphere in the Federal Reserve has been tense as officials are divided on whether to implement a third rate cut of the year. With the US economy showing signs of slowing down and global trade tensions on the rise, the pressure is on for the Fed to take action.
Some officials argue that a rate cut is necessary to stimulate economic growth and prevent a recession. They believe that lowering interest rates will encourage consumers and businesses to spend more, which will in turn boost the economy. Additionally, a rate cut could help to lower borrowing costs for households and businesses, making it easier for them to invest and expand.
On the other hand, there are officials who are cautious about implementing another rate cut. They are concerned about the potential risks of lowering rates too much, such as fueling inflation or undermining the Fed’s ability to respond to future economic downturns. These officials believe that the current economic data does not justify a third rate cut at this time.
The discussions and debates within the Federal Reserve highlight the complexities of monetary policy and the challenge of balancing competing economic priorities. As the Fed continues to weigh its options, the decision on whether to cut rates for a third time this year remains uncertain.
In conclusion, the division within the Federal Reserve on the topic of a third rate cut reflects the complexity of economic policy making and the challenges facing the US economy. It will be crucial for the Fed to carefully consider all factors before making a decision that will have far-reaching implications for the economy and financial markets.
The Federal Reserve on Wednesday, December 10, 2025, cut its benchmark interest rate by 25 basis points to a target range of 3.50%-3.75%. This marks the third consecutive rate cut since September, highlighting a shift in focus towards supporting a softening labor market even as inflation remains somewhat elevated. The decision was far from unanimous, reflecting deep divisions within the Federal Open Market Committee (FOMC) about the future path of monetary policy.
Key Takeaways from the December 2025 Meeting:
- Rate Cut: The FOMC voted to lower the federal funds rate by 25 basis points, bringing it to a range of 3.50% to 3.75%. This is the lowest level since 2022.
A Divided Fed: The vote was a contentious 9-to-3 split.
- Voting in favor: Chair Jerome Powell and eight other members.
Dissenting: Three members voted against the decision. Two members, Austan Goolsbee and Jeffrey Schmid, preferred no change to rates, arguing that inflation remains a concern. One member, Stephen Miran, favored a larger 50-basis-point cut to provide more support to the economy. This level of dissent is the highest since 2019.
Slower Pace Ahead: The Fed’s updated Summary of Economic Projections, or “dot plot,” indicates a significant slowing in the pace of rate cuts. Officials now project only one rate cut in 2026, down from previous expectations. This suggests a “hawkish cut,” where the Fed provides immediate relief but signals a more cautious approach going forward.
Economic Outlook: The Fed’s statement noted that job gains have slowed and the unemployment rate has edged up, while inflation has moved up somewhat and remains elevated. The committee viewed the downside risks to employment as having risen. Chair Powell stated in his press conference that the Fed is “well positioned to wait to see how the economy evolves” before making further moves, emphasizing data dependence.
Impact on Consumers: The rate cut is expected to offer some relief to borrowers. For example, mortgage rates, which have already fallen from their 2023 peaks, could see further easing. Bankrate estimates that a borrower with a $500,000 mortgage could save roughly $584 per month compared to the highest rates in late 2023. Savings on other loans like auto loans and home equity lines of credit will be more modest but can add up over time.
For a deeper dive into the Fed’s decision and its implications for your finances, you can watch this video: Federal Reserve cuts interest rates. This video provides context and expert analysis on the Federal Reserve’s latest move.
