By Ginika Igboke
The Federal Reserve lowered its benchmark interest rate by a quarter point at its final policy meeting of the year on December 10, a widely anticipated move that revealed significant disagreement among officials.
The Federal Open Market Committee voted 9–3 to reduce the target range for the federal funds rate to 3.5% to 3.75%. The decision marks the third consecutive cut this year, but the level of dissent was the highest since September 2019.
In its statement, the Fed noted that “economic activity has been expanding at a moderate pace,” while job gains have slowed and the unemployment rate has edged higher. It also acknowledged that “inflation has moved up since earlier in the year and remains somewhat elevated.”
The dissenting votes highlighted the committee’s internal debate. Governor Stephen Miran favored a more aggressive half-point cut. In contrast, Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeffrey Schmid supported leaving rates unchanged.
Updated Economic Outlook Points to Slower Easing Pace
The Fed also released its quarterly Summary of Economic Projections, which signaled a more gradual path ahead. Policymakers now anticipate only one rate cut in both 2026 and 2027, down from previous expectations.
The projections included a modestly improved economic forecast:
Growth: GDP growth for 2026 was revised up to 2.3% from 1.8%.
Inflation: The forecast for the PCE price index was lowered to 2.4% for 2026, with core PCE expected at 2.5%.
Unemployment: The unemployment rate is projected to be 4.4% in 2026, unchanged from September.
A “Wait-and-See” Posture for Future Meetings
Chair Jerome Powell emphasized a cautious, data-dependent approach going forward. “We’ll carefully evaluate that incoming data,” Powell stated, adding that with the cumulative rate reductions to date, “we are well-positioned to wait and see how the economy evolves.”
In a separate decision, the Fed confirmed it will restart purchases of Treasury securities, buying $40 billion in Treasury bills beginning December 12.
Underlying Tensions and Data Challenges
The split vote reflects a deepening policy divergence among officials in recent weeks. One faction supports further rate cuts to guard against slowing employment and the lagged effects of tight policy. Another cautions against easing too quickly, pointing to resilient economic activity and the risk of re-accelerating inflation.
Policymakers face the ongoing challenge of balancing their dual mandate of maximum employment and price stability. Their task has been complicated by delayed government data, including the November jobs report and consumer price index, which are scheduled for release in mid-December.
The committee’s next meeting is scheduled for January 27–28.
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