(NewsNation) — The Federal Reserve slashed its key interest rate on Wednesday for the third meeting in a row, but policymakers remain divided.
The quarter-point rate cut, which was widely expected, brings the Fed’s key rate to its lowest level in three years.
“The downside risks to employment appear to have risen in recent months,” Fed chair Jerome Powell said Wednesday.
Powell said that while official labor data remains delayed, available evidence suggests that “both layoffs and hiring remain low.”
Nine officials on the 12-person committee supported the rate cut decision, but three opposed. Stephen Miran, a governor appointed by President Donald Trump earlier this year, voted for a larger half-point reduction. Jeffrey Schmid, president of the Kansas City Fed, and Austan Goolsbee, president of the Chicago Fed, preferred no change to the rate.
The decision comes amid noisy economic data, which has had policymakers split over the main threat to the American economy: stubborn inflation or a cooling labor market.
“There is no risk-free path for policy as we navigate this tension between our employment and inflation goals,” Powell said Wednesday.
The latest cut signals a move to bolster the labor market, even as inflation remains above the Fed’s 2% target.
Fed officials were divided on a third rate cut
The committee has been divided at recent meetings, so Wednesday’s dissent was not entirely surprising.
Goolsbee was the notable change, joining Schmid in calling to leave rates alone, suggesting concern about inflation risks.
Other officials have been arguing that a cut is necessary to support the weakening labor market. With limited data from the last two months due to the government shutdown, it’s been unclear which side has the strongest case. Those reports are typically a significant factor in a rate cut decision.
“I think that’s one of the reasons that the Federal Reserve is having more disagreement within its ranks than it has in the past,” said Stephen Kates, a financial analyst at Bankrate. “We don’t have as much data as we want to understand what the economy has been doing over the last few months.”
What does a rate cut mean for the average American?
The Fed’s rate cut could help bring down borrowing costs for consumers who have seen elevated rates on auto loans, credit card APRs and mortgages. Lower rates generally mean cheaper borrowing and a bit more breathing room in household budgets.
That said, because the rate cut was widely expected, the effect may be largely priced in already, meaning downward movement on mortgage rates could be minimal in the short term.
A quarter-percent cut might not feel significant for now, but over time it can add up, potentially saving borrowers hundreds of dollars in interest.