Fed cuts rates as dissents loom at key December meeting

Economic Outlook - Some officials view the economy as cooling in a controlled manner, while others express concern that deterioration could accelerate if borrowing costs remain high for an extended period [1] - Hiring has slowed and wage growth has decelerated, yet unemployment remains low by historical standards [1] Federal Reserve Actions - The Federal Open Market Committee (FOMC) lowered the interest rate by a quarter percentage point in both September and October due to labor market concerns, maintaining a cautious "wait-and-see" approach influenced by tariff inflation and trade policy [2] - The FOMC signaled a potential pause in rate cuts in the short term, with the Federal Funds Rate now set between 3.50% and 3.75% following a 25-percentage-point cut in December [5][6] - The Fed plans to buy $40 billion of Treasury bills monthly starting December 12 to ensure sufficient cash in the financial system, marking a shift from previous balance sheet reduction strategies [13][15] Inflation and Employment - The Fed's dual mandate requires balancing inflation and job growth, with current inflation levels deemed too high and the labor market showing signs of softening [9][10] - Powell indicated that the Fed has done enough to support employment while keeping rates high enough to manage price pressures [7] Future Projections - The quarterly Summary of Economic Projections suggests one more quarter-point rate reduction is expected in 2026, with growth upgraded to 2.3% primarily due to adjustments from the government shutdown [4][19] - The "dot plot" will be closely monitored for insights into the Fed's future rate strategy, with a small number of projected cuts indicating caution among policymakers [17][18]