The divided US Federal Reserve has cut interest rates for the third consecutive time and maintained its outlook for just one cut in 2026.
The Federal Open Market Committee (FOMC) voted 9-3 to lower the benchmark federal funds rate to a range of 3.5%-3.75%. It also subtly changed the wording of its statement, indicating greater uncertainty about when it might effect a rate cut again.
The disagreements and rate estimates highlight differences among policymakers that have emerged over whether labor market weakness or stubborn inflation represents the greater threat to the U.S. economy.
Summary of US Fed decisions on December 10, 2025:
- US Fed cuts rates by 25 bps in third rate cut in 2025
- Fed to consider “extension and timing” of additional adjustments
- The Fed will start buying US Treasury bills on December 12
- Fed will buy $40 billion of US treasury bills in 30 days
- The US Federal Reserve has indicated that rates may be cut for the time being
In its October statement, the FOMC explained what it would take into account “when considering additional adjustments” to its benchmark. In Wednesday’s statement, the committee reiterated the language it used last December – just before the moratorium on rate cuts – “in considering the extent and timing of additional adjustments.”
Disagreement on the Fed
The result marks the first time since 2019 that three officials voted against a policy decision, with disagreements at both ends of the policy spectrum.
Two regional Fed chairmen—Auston Goolsbee from Chicago and Jeff Schmid from Kansas City—voted against a rate cut, preferring the status quo. Governor Stephen Miron, who was appointed to the central bank by US President Donald Trump in September, again dissented in favor of a larger, half-point cut.
US economic data
A contradictory US economic data explains why there has not been a unanimous vote on the FOMC since June. The US government shutdown complicated the policy outlook by delaying the release of key data.
- The US unemployment rate rose to 4.4% in September, from 4.1% in June.
- The US inflation rate rose to 2.8% through September, still above the central bank’s 2% target.
- US GDP growth is seen at 2.3% in 2026, compared to the earlier estimate of 1.8%. The inflation rate has come down to 2.4% from earlier 2.6%.
The third US Fed rate cut by 2025 came shortly after Trump said he had decided who he would nominate as Fed chair to succeed Jerome Powell in May and indicated the decision would be announced early next year. The White House has criticized the Fed for not cutting interest rates faster enough, raising concerns that the central bank’s independence is at risk.
