A divided Federal Reserve cuts interest rates for a 3rd straight time

The Federal Reserve is again expected to lower its benchmark interest rate by a quarter percentage point Wednesday, in an effort to support a weakening job market. But stubborn inflation and delayed economic data could complicate the Fed's decision, leading to more-than-usual disagreement within the rate-setting committee.

A rate cut could make it slightly cheaper to borrow money to buy a car, expand a business or carry a balance on a credit card. The Fed also lowered rates at its last two meetings, but the decisions were not unanimous, highlighting the competing pressures that the central bank is facing.

Inflation is still well above the Fed's target, which would ordinarily call for keeping interest rates elevated. But unemployment has also been creeping up, which would typically point toward lower rates. Fed policymakers are divided on which of those problems is more urgent.

The decision is also clouded by a lack of timely data as a result of the six-week government shutdown. Furloughed federal workers were unable to gather inflation and unemployment numbers in October. And November's readings have been delayed until next week — too late to sway the Fed's decision.

For now, policymakers have to rely on somewhat stale economic data from September, when annual inflation was clocked at 2.8%, according to the Fed's preferred measure, while unemployment stood at 4.4%. Both figures were slightly higher than in the previous month.

People shop in a discount supermarket in Union, N.J., on Sept. 22.

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Charly Triballeau

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AFP via Getty Images

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Investors are betting that a majority of Fed policymakers will vote for a quarter-point cut at the conclusion of this week's meeting. Policymakers will also update their predictions about where they think rates are going next year.

At September's meeting, Fed officials projected an average of just one additional interest rate cut in 2026.

President Trump has been demanding that the central bank cut rates more aggressively, even though the Fed is designed to be insulated from political pressure. In September, Trump installed White House economic adviser Stephen Miran to fill a short-term vacancy on the Fed board. Miran has cast the lone vote for larger, half-point rate cuts at each of the last two meetings.

Trump has also tried to replace Fed Governor Lisa Cook over unproven allegations of mortgage fraud. So far, that effort has been blocked by the Supreme Court. The high court will hear arguments in Cook's case next month.

Trump has been outspoken in his criticism of Fed Chair Jerome Powell, saying Powell has been "too late" in cutting interest rates. Powell's term as Fed chair expires in May, and Trump is expected to nominate a new leader for the central bank soon.
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