The Federal Reserve’s Open Market Committee voted 9-3 on Wednesday to lower interest rates by a quarter point in spite of clear divisions within the central bank’s powerful rate-setting committee.
Fulfilling expectations of a “hawkish cut,” the committee cut its key overnight borrowing rate by a quarter percentage point, putting it in a range between 3.5%-3.75%. It was the committee’s third straight cut.
CNN said that the vote Wednesday likely was the Central Bank’s toughest call since at least September 2024, when officials debated the size of that month’s rate cut.
CNBC said the vote carried caution flags about where policy is headed and featured “no” votes from three members. That hasn’t happened since September 2019.
Fed Officials Disagree Over Fulfilling Bank’s Dual Mandate
Analysts said that Fed officials disagree over which side of the bank’s dual mandate they want to prioritize — full employment or stable prices.
This year, job growth has been unusually weak and several Fed officials have said it could worsen if they don’t continue to lower rates. Meanwhile, other officials have said the greater risk is that inflation remains stuck above the Fed’s 2% target as President Donald Trump’s widespread tariffs pack a bigger wallop on the economy.
CNBC said the post-meeting rate statement repurposed language from the committee’s meeting a year ago.
“In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks,” the statement said.
President Trump has said he knows who he will nominate to succeed Fed Chief Powell once the chairman has left the seat and will make that announcement early next year. Powell’s term at the helm of the world’s largest economy ends in May. A new chair typically is not nominated until spring, but Treasury Secretary Scott Bessent has led a wide search for Powell’s replacement at Trump’s behest.
CNBC reported that President Trump will begin the final interviews of candidates for the Federal Reserve chair this week.
“We’re going to be looking at a couple different people, but I have a pretty good idea of who I want,” Trump told reporters Tuesday night aboard Air Force One.
Interviews Resume for Fed Chair Candidates
CNBC said that the interviews by Trump and Treasury Secretary Scott Bessent will begin with former Fed Governor Kevin Warsh on Wednesday and also include Kevin Hassett, the director of the National Economic Council. It restarts the process that was derailed a bit last week when interviews with candidates were abruptly canceled.
A Federal Reserve split over where its priorities should lie lowered its key interest rate Wednesday, but signaled a tougher road ahead for further reductions.
Fulfilling expectations of a “hawkish cut,” the central bank’s Federal Open Market Committee cut 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.
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