WASHINGTON (AP) \u2014 The Federal Reserve reduced its key interest rate for the third time in a row Wednesday but signaled that it may leave rates unchanged in the coming months, a move that could attract ire from President Donald Trump, who has demanded steep reductions to borrowing costs.<\/p>\n
In a statement released after a two-day meeting, the Fed\u2019s rate-setting committee signaled that it may keep its rate unchanged in the coming months. And in a set of quarterly economic projections, Fed officials signaled they expect to lower rates just once next year.<\/p>\n
Wednesday’s cut reduced the rate by a quarter-point to about 3.6%, the lowest it has been in nearly three years. Lower rates from the Fed can bring down borrowing costs for mortgages, auto loans, and credit cards over time, though market forces can also affect those rates.<\/p>\n
Three Fed officials dissented from the move, the most dissents in six years and a sign of deep divisions on a committee that traditionally works by consensus. Two officials voted to keep the Fed’s rate unchanged, while Stephen Miran, whom Trump appointed in September, voted for a half point cut.<\/p>\n
December\u2019s meeting could usher in a more contentious period for the Fed. Officials are split<\/a> between those who support reducing rates to bolster hiring and those who\u2019d prefer to keep rates unchanged because inflation remains above the central bank\u2019s 2% target. Unless inflation shows clear signs of coming fully under control, or unemployment worsens, those divisions will likely remain.<\/p>\n And Trump could name a new Fed chair as soon as later this month<\/a> to replace Powell when his term ends in May. Trump\u2019s new chair is likely to push for sharper rate cuts than many officials may support.<\/p>\n A stark sign of the Fed\u2019s divisions was the wide range of cuts that the 19 members of the Fed\u2019s rate-setting committee penciled in for 2026. Seven projected no cuts next year, while eight forecast that the central bank would implement two or more reductions. Four supported just one. Only 12 out of 19 members vote on rate decisions.<\/p>\n At a press conference following the announcement of the rate cut, Powell signaled that the Fed may hold off on cutting rates at least in January, and said Fed officials \u201cwill carefully evaluate the incoming data,\u201d adding that the Fed is “well positioned to wait to see how the economy evolves.\u201d He did, however, rule out an increase in rates.<\/p>\n “What you see is some people feel we should stop here and we\u2019re in the right place and should wait, and some people think we should cut more next year,\u201d Powell said.<\/p>\n The Fed met against the backdrop of elevated inflation that has frustrated<\/a> many Americans, with prices higher for groceries, rents, and utilities. Powell has previously acknowledged those frustrations and said they reflect the sharp overall price increases in the five years since COVID. Consumer prices have jumped 25% in that time.<\/p>\n In a delayed report last week, the government said the Fed\u2019s preferred inflation gauge remained high in September, with both overall and core prices rising 2.8%<\/a> from a year earlier. That is far below the spikes in inflation three years ago but still painful for many households after the big run-up since 2020.<\/p>\n The Fed typically keeps its key rate elevated to combat inflation, while it often reduces borrowing costs when unemployment worsens to spur more spending and hiring.<\/p>\n Adding to the Fed’s challenges, job gains have slowed sharply this year and the unemployment rate has risen for three straight months<\/a> to 4.4%. While that is still a low rate historically, it is the highest in four years. Layoffs are also muted, so far, as part of what many economists call a \u201clow hire, low fire\u201d<\/a> job market.<\/p>\n