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The US Federal Reserve has cut interest rates In another divided vote.
But it also signaled it was likely to cut borrowing costs further as officials look for clear signals about the direction of the job market and inflation He “remains somewhat high-strung.”
New projections released after the US central bank’s two-day meeting showed that the average policymaker sees only a quarter-percentage-point cut in 2026, the same as in September, with inflation expected to slow to about 2.4% by the end of next year, even as economic Development The upward trend has increased to 2.3% and the unemployment rate remains moderate at 4.4%.
“When considering the extent and timing of additional adjustments to the target range for federal funds rates, the Committee will carefully assess incoming data,” the rate-setting Federal Open Market Committee said in language.
There were three disagreements with Chicago over the decision to cut the benchmark policy rate by a quarter percentage point to a range of 3.50-3.75%. fed President Austin Goolsby joined Kansas City Fed President Jeffrey Schmid in arguing that the policy rate should be left unchanged, and Fed Governor Stephen Meeran again advocated for a major cut of half a percentage point.
How monetary policy evolves from here, heading into a midterm US election year that could revolve around the economy’s performance and sharp cuts urged by President Donald Trump, will now depend on data that is still lagging behind the impact of the 43-day federal government shutdown in October and November.
Solid 2026 economic outlook
The projections are optimistic in a way: interest rates may remain higher than expected, but the economy appears to be growing rapidly despite falling inflation and even falling unemployment rates.
But the latest policy statement and projections were prepared without the benefit of recent jobs and inflation reports, and instead relied on “available indicators,” which Fed officials said included their own internal surveys, community outreach and private data.
The most recent official data on unemployment and inflation is for September, and the unemployment rate rose to 4.4% from 4.3%, while the Fed’s preferred measure of inflation also rose slightly to 2.8% from 2.7%. The Fed’s inflation target is 2%, but the pace of price increases has risen steadily from 2.3% in April, a fact at least partly due to the passage of rising import taxes to consumers and a driving force behind the central bank’s policy divide.
Jobs and inflation data for November will be released next week, followed by a detailed economic growth report for the third quarter.
“Available indicators suggest that economic activity is expanding at a moderate pace,” the Fed’s statement said. “The pace of job growth has slowed this year and the unemployment rate has increased by September,” it said. It refers to the unemployment rate as “low”.
Estimates showed that one in six policymakers expect no rate cuts this year, and seven expect no further cuts in 2026.
The average estimate is for an additional quarter-percentage-point cut in 2027 as well as inflation continuing to ease toward the central bank’s 2% target.