Federal Reserve officials delivered a third consecutive interest-rate reduction and maintained their outlook for just one cut in 2026.

The Federal Open Market Committee voted 9-3 Wednesday to lower the benchmark federal funds rate by a quarter point to a range of 3.5%-3.75%. It also subtly altered the wording of its statement suggesting greater uncertainty about when it might cut rates again.

The dissents and the rate projections highlight divisions among policymakers that have emerged over whether weakness in the labor market or stubborn inflation represent the larger danger to the US economy.

In their October statement, the FOMC described what it would take into account “in considering additional adjustments” to their benchmark. In Wednesday’s statement the committee reverted to language used last December — just before a pause in rate cuts — to say “in considering the extent and timing of additional adjustments.”

The result marked the first time since 2019 that three officials voted against a policy decision, with dissents on both ends of the policy spectrum. The S&P 500 rose while Treasury yields and the dollar declined. No major changes were seen in market expectations for interest-rate cuts in 2026.

Two regional Fed presidents — Austan Goolsbee from Chicago and Jeff Schmid from Kansas City — voted against the decision, preferring to keep rates unchanged. Governor Stephen Miran, whom Trump appointed to the central bank in September, dissented again in favor of a larger, half-point reduction.

Fed officials also authorized fresh purchases of short-term Treasury securities to maintain an “ample” supply of bank reserves.

The decision to lower rates comes after divisions on the committee spilled into public view in recent weeks. Following the last rate cut in October, several officials warned of persistent inflation, indicating their hesitancy to support another reduction. Others remained focused on a weakening labor market, calling for at least one more cut.

Conflicting data helps explain why there hasn’t been a unanimous vote on the FOMC since June.

Unemployment moved to 4.4% in September, up from 4.1% in June. But prices — as measured by the Fed’s preferred gauge of inflation — rose 2.8% in the year through September, still meaningfully higher than the central bank’s 2% target.

The government shutdown has further complicated the policy outlook by delaying the release of key data.

Despite the divisions on the committee and economic uncertainty, investors had expected a cut on Wednesday after New York Fed President John Williams, who is viewed as close to Powell, signaled his support for a December reduction in a Nov. 21 speech.

Fresh forecasts

In their new economic forecasts officials’ median projections pointed to one cut in 2026, and one in 2027. The rate outlook remained deeply divided, however. Seven officials indicated they favored holding rates steady for all of 2026, while eight signaled support for at least two.

Officials upgraded their median outlook for growth in 2026, to 2.3% from the 1.8% they projected in September. They also foresaw inflation declining to 2.4% next year, from the 2.6% they projected in September.

The policy decision also comes soon after President Donald Trump said he’s decided whom he’ll nominate to succeed Powell as Fed chair in May and indicated a decision will be announced early next year. The White House has poured criticism on the Fed for not cutting interest rates more quickly, fueling concerns that the central bank’s independence is under threat.

Fed officials approved the new Treasury purchases beginning Dec. 12. The move was anticipated by many Wall Street banks as a way to support liquidity in overnight funding markets.

Since 2022 and until this month, the central bank had been reducing the size of its Treasury holdings, aiming to reach the smallest possible size without disrupting money markets.

(With assistance from Carter Johnson, Adrienne Tong, Sophie Caronello and Vince Golle.)

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