Divided Fed Cuts Rates to 3.75-4% Amid Inflation Concerns

The Federal Reserve cut interest rates by a quarter point to a range of 3.75%-4.00% in a 10-2 vote amid concerns over a weakening labor market and persistent inflation above the 2% target. The decision revealed rare dissent within the Federal Open Market Committee, with some members favoring no cut due to elevated inflation and others advocating a larger half-point reduction to support the softening job market, reflecting deep divisions about the appropriate monetary policy path. Fed Chair Jerome Powell emphasized that a rate cut in December is not guaranteed, highlighting uncertainty due to diminished economic data caused by the government shutdown. Additionally, the Fed plans to end its asset purchase reductions on December 1 and will begin replacing maturing bonds with short-term Treasury bills to stabilize liquidity and ease financial market conditions. Policymakers noted that while economic activity has been moderate, job gains have slowed and inflation remains somewhat elevated, complicating the Fed's balancing act. The debate reflects broader uncertainty driven by conflicting economic indicators and the impact of tariffs on business costs, with differing views among Fed members influenced by their regional perspectives and ties to the administration.