U.S. Fed Reduces Policy Rate to 3.5-3.75 Percent
Meeting widespread predictions, the Fed trimmed its primary overnight lending rate by a quarter-point, establishing a new range of 3.5 to 3.75 percent.
The decision exposed unusual fractures within the central bank's leadership, with three board members opposing the cut—a level of dissent unseen in approximately six years.
The 9-3 outcome reflected opposition from both policy extremes. Rate "hawks" advocating higher borrowing costs to combat inflation clashed with "doves" pushing for lower rates to bolster employment.
Following Wednesday's reduction, the Fed emphasized a cautious approach toward future adjustments.
"In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee (Federal Open Market Committee, FOMC) will carefully assess incoming data, the evolving outlook, and the balance of risks," the Fed declared.
Gary Clyde Hufbauer, nonresident senior fellow at the Peterson Institute for International Economics, told media before the announcement that the Fed would "put out a very skeptical statement on further cuts."
Dean Baker, co-founder of the Center for Economic and Policy Research, argued Tuesday that this week's reduction "should be a no-brainer."
"The September jobs report showed the unemployment rate had risen to 4.4 percent. That is still low by historical standards, but it's a full percentage point above the low hit in 2023. It's also 0.5 percentage points above the average for the years 2018-2019," Baker wrote.
"The unemployment rate for young workers between the ages of 20-24 was 9.2 percent in September. That was the highest rate since May of 2021. It is 3.7 percentage points above the low hit in April of 2023," he wrote.
President Donald Trump has consistently criticized Fed Chair Jerome Powell, occasionally launching personal attacks against the central bank leader.
Wednesday brought fresh condemnation from Trump, who dismissed the quarter-point adjustment as inadequate, suggesting it "could have been at least doubled."
Trump, a vocal proponent of aggressive rate cuts to stimulate expansion, characterized the reduction as "rather small" and labeled Powell a "stiff."
Powell's tenure concludes mid-2026, prompting widespread speculation that Trump will appoint a loyalist as successor.
Brookings Institution Senior Fellow Darrell West told media: "For top positions, Trump loves to choose individuals who are loyal to him. He wants individuals who understand his position and execute his agenda."
"He is not likely to pick an independent-minded person for such an important post as the Federal Reserve Bank," West stated.
Christopher Galdieri, political science professor at Saint Anselm College in New Hampshire, told media: "Trump will want someone who will take direction from Trump over anything else."
Other analysts hold contrasting perspectives.
Clay Ramsay, researcher at the Center for International and Security Studies at the University of Maryland, noted: "The Fed is complicated to manipulate -- far more so than a cabinet department."
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