financetom
Economy
financetom
/
Economy
/
Divided Fed lowers rates, signals pause and one 2026 cut as growth rebounds
News World Market Environment Technology Personal Finance Politics Retail Business Economy Cryptocurrency Forex Stocks Market Commodities
Divided Fed lowers rates, signals pause and one 2026 cut as growth rebounds
Mar 10, 2026 10:05 PM

WASHINGTON, Dec 10 (Reuters) - The U.S. Federal Reserve cut interest rates on Wednesday in another divided vote, but signaled it will likely pause further reductions in borrowing costs as officials look for clearer signals about the direction of the job market and inflation that "remains somewhat elevated."

New projections issued after the U.S. central bank's two-day meeting showed the median policymaker sees just one quarter-percentage-point cut in 2026, the same outlook as in September, with inflation expected to slow to around 2.4% by the end of next year even as economic growth accelerates to an above-trend 2.3% and the unemployment rate remains at a moderate 4.4%.

"In considering the extent and timing of additional adjustments to the target range for the federal funds rates, the Committee will carefully assess incoming data," the rate-setting Federal Open Market Committee said in language that in the past has been used to signal a pause in policy actions - an outlook at odds with market expectations of two rate cuts next year.

The decision to lower the benchmark policy rate by a quarter of a percentage point to the 3.50%-3.75% range drew three dissents, with Chicago Fed President Austan Goolsbee joining Kansas City Fed President Jeffrey Schmid in arguing the policy rate should be left unchanged, and Fed Governor Stephen Miran again advocating a larger half-percentage-point reduction.

How monetary policy evolves from here, heading into a midterm U.S. election year that could revolve around the performance of the economy and with President Donald Trump urging sharper reductions, will now hinge on data that is still lagging from the impact of the 43-day federal government shutdown in October and November.

SOLID 2026 ECONOMIC OUTLOOK

The projections are in a sense optimistic: Interest rates may remain higher than anticipated, but the economy is seen growing faster even as inflation falls and the jobless rate also eases lower.

But the latest policy statement and projections were crafted without the benefit of recent job and inflation reports, and instead relied on "available indicators," which Fed officials have said include their own internal surveys, community contacts and private data.

The most recent official data on unemployment and inflation is for September, and showed the unemployment rate rising to 4.4% from 4.3%, while the Fed's preferred measure of inflation also increased slightly to 2.8% from 2.7%. The Fed has a 2% inflation target, but the pace of price increases has risen steadily from 2.3% in April, a fact at least partly attributable to the pass-through of rising import taxes to consumers and a driving force behind the central bank's policy divide.

Job and inflation data for November will be released next week, followed later by a detailed report of economic growth for the third quarter.

"Available indicators suggest that economic activity has been expanding at a moderate pace," the Fed's statement said. "Job gains have slowed this year, and the unemployment rate has edged up through September," it said, dropping a reference to the jobless rate as "low."

The projections showed a core of six policymakers preferring no rate cut this year, and seven anticipating no further cuts in 2026.

The median projection is for one additional quarter-percentage-point cut in 2027 as well as inflation continues to subside towards the central bank's 2% target.

Fed Chair Jerome Powell will hold a press conference at 2:30 p.m. EST (1930 GMT) to elaborate on the meeting.

Comments
Welcome to financetom comments! Please keep conversations courteous and on-topic. To fosterproductive and respectful conversations, you may see comments from our Community Managers.
Sign up to post
Sort by
Show More Comments
Related Articles >
US Economy Expanded at 'Slight to Moderate Pace,' Beige Book Shows
US Economy Expanded at 'Slight to Moderate Pace,' Beige Book Shows
Jul 15, 2026
02:24 PM EDT, 07/15/2026 (MT Newswires) -- The US economy expanded at a slight to moderate pace in 11 of the 12 Federal Reserve districts, while the other district reported no change, the Federal Reserve's most recent Beige Book update released Wednesday showed. This was little changed from the previous Beige Book, the Fed said. Consumer spending was slightly higher,...
Economic activity on the rise and inflation may be improving, Fed survey shows
Economic activity on the rise and inflation may be improving, Fed survey shows
Jul 15, 2026
July 15 (Reuters) - U.S. economic activity increased slightly in recent weeks, employment rose, and companies and households indicated that inflation may have improved, the Federal Reserve said on Wednesday, in a report that will help shape the policy debate when Kevin Warsh leads his second interest rate-setting meeting in two weeks. Contacts generally expected the economy to continue to expand in...
Federal Reserve Watch for July 15: Warsh Repeats FOMC Will Take Ownership of Inflation, Act as Needed
Federal Reserve Watch for July 15: Warsh Repeats FOMC Will Take Ownership of Inflation, Act as Needed
Jul 15, 2026
03:18 PM EDT, 07/15/2026 (MT Newswires) -- Fed Chairman Kevin Warsh (voter) repeated that the FOMC will take ownership of inflation and take actions if needed to bring it back toward the 2% goal but did not provide forward guidance. Warsh again said that monetary policy caused inflation through its policy and that would not be the case under his...
Busiest US container port sets cargo record in June
Busiest US container port sets cargo record in June
Jul 15, 2026
LOS ANGELES, July 15 (Reuters) - The Port of Los Angeles, the busiest U.S. container seaport, said on Wednesday it set a June cargo record as shippers ranging from retailers to data center builders rushed in goods to avoid higher fuel costs and new U.S. import tariffs. The Southern California port handled 1,002,734 20-foot equivalent units (TEUs) last month, 12% more...
Copyright 2023-2026 - www.financetom.com All Rights Reserved