The Fed made its toughest cut of the year

The Federal Reserve went three for three, slashing interest rates at a third meeting straight and dropping benchmark borrowing rates 25 basis points to a range of 3.5% to 3.75%.

The latest rate cut came as no surprise, but that doesn’t mean all twelve of the FOMC voting members were on board. Two—Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeff Schmid—favored holding rates steady to stand firm against inflation. On the other end of the spectrum, governor Stephen Miran pushed for a 50 basis point cut (as he had in the previous two meetings) to bolster the weakening job market.

This marks the fourth non-unanimous vote in a row, and the first time since 2019 that three committee members disagreed with the group, proving that dissension is growing in the ranks.

What comes next

Looking ahead, the Fed’s “dot plot” predicts just one quarter-point rate cut in 2026, which falls on the low side of expectations. Nonetheless, the central bank’s economic forecast is surprisingly sunny, projecting unemployment to subside from 4.5% at the end of this year to 4.4% by the end of next. GDP is also expected to grow from 1.7% to 2.3%, and inflation to cool from 3% to 2.5%.

“Consumer spending appears to have remained solid, and business-fixed investment has continued to expand,” Powell said during the press conference. Still, he acknowledged that central bankers aren’t navigating with full visibility due to the government shutdown and the resulting lag in reports. "We're going to get data, but we're going to have to look at it carefully and with a somewhat skeptical eye," Powell said.

The Fed also plans to begin buying Treasury bills, starting with around $40 billion on Friday, to bulk up supply and smooth out recent bumps in short-term financing markets.

JPow’s last stand

Powell’s remarks today carry extra weight since this is likely the last time he’ll step on that podium as head of the Fed before President Trump announces his replacement early next year. Leading contenders include former Fed Governor Kevin Warsh and Kevin Hassett, director of the National Economic Council, but whoever wins will inherit Powell’s chair once his term ends in May.

Powell has served as Fed chair since 2018, and although he’s weathered plenty of crises, we’re willing to bet 2025 will go down as his most annoying year yet. Trump, after all, has publicly railed against Powell to lower rates, threatened to fire him, and added plenty of insults. After today’s cut arrived, Trump complained that Powell could have at least doubled it.

Powell has taken the taunts with the stoicism of a Buckingham Palace guard, but he must be counting down the days until he can tune everyone out and just relax in retirement.—JD

The doggedly “data-driven” Fed is effectively flying data-blind. Because of the record-long government shutdown, its usual October labor-market and pricing metrics never arrived — and any catch-up won’t land until next week, when November data is released. Conveniently after today’s decision deadline.

The Fed already took one “data-lite” swing on October 29, cutting a quarter-point right in the thick of the shutdown fog. So where exactly was the data-driven part of today’s call?

The Fed should have waited for next week’s data dump and stuck with its own mantra. If cutting is still the right move, January was right there. One cut is now expected for all of 2026, so a month’s delay wouldn’t have mattered.

Tune in to Brew Markets to hear what I think Powell’s legacy will be.—AB