As expected, the Federal Reserve cut its key interest rate this week, slicing it by a quarter-point.
But while the Fed cut the rate for the third straight time, indications are the rate could stay the same for awhile now.
At a news conference after the announcement, Fed Chair Jerome Powell suggested the Fed would likely hold off on further rate cuts in the coming months while evaluating the health of the economy. And in a set of quarterly economic projections, Fed officials signaled they expect to lower rates just once next year, according to multiple media accounts.
This week’s cut, announced Wednesday, reduced the rate to about 3.6%, the lowest it has been in nearly three years. Powell said Fed officials “will carefully evaluate the incoming data” and that the Fed is “well positioned to wait to see how the economy evolves.” The chair also said that the Fed’s key rate was close to a level that neither restricts nor stimulates the economy, according to reports.
The decision to cut rates was not unanimous. Three Fed officials dissented, the highest level of dissent in six years. Two officials voted to keep the Fed’s rate unchanged, while Stephen Miran, whom Trump appointed in September, lobbied for a half point cut, as he has since he was appointed.
December’s meeting could be more contentious. Officials are reportedly divided between those who support reducing rates to bolster hiring and those afraid more cuts would adversely affect inflation, which remains above the central bank’s 2% target. Unless inflation shows clear signs of coming fully under control, or unemployment worsens, those divisions will likely remain.
“What you see is some people feel we should stop here and we’re in the right place and should wait, and some people think we should cut more next year,” Powell said. He did rule out a rate hike next year.
