Fed Cuts Rates by 25 Basis Points With Three Dissents

Core Points - The Federal Reserve voted to lower the benchmark rate by 25 basis points, marking the most divided Fed since before the pandemic with three dissents for the first time since 2019 [1] - Six members of the committee indicated opposition to lowering rates, with a hawkish tone in the statement regarding future adjustments to the target range [2] - The committee's statement noted moderate economic expansion, with a consensus GDP forecast of 1.7% for this year and an upward revision for 2026 to 2.3% [4] Economic Indicators - Unemployment is projected to finish this year at 4.5%, with a slight decrease to 4.4% next year, reflecting a slowdown in job gains [4] - Inflation remains elevated but is expected to slow significantly next year, with the PCE headline forecast decreasing from 2.9% this year to 2.4% in 2026 [5] - The Fed does not anticipate reaching its 2% inflation target until 2028, with Core PCE expected to finish at 3% in that year [6] Balance Sheet Management - The Fed's reserve balances have declined to ample levels, and it plans to purchase shorter-term treasuries, primarily bills, and up to three-year notes as necessary [6] - The first operation for these purchases will be announced tomorrow, with approximately $40 billion in Treasury bills to be bought starting Friday [6]