Fed Makes Third Rate Cut but Sees Just One Reduction in 2026

A divided US Federal Reserve lowered interest rates on Dec. 10 for the third consecutive time in 2025, citing labor market concerns even as inflation remained elevated amid the impact of President Donald Trump’s tariffs.

The quarter-percentage-point cut brings interest rates to a range of 3.5% to 3.75%, the lowest in about three years, in line with market expectations.

But the Fed penciled in just one additional rate cut for 2026, with Chairman Jerome Powell signaling a higher bar for future easing, The Straits Times reported.

Powell said during a press briefing that officials are now in a strong position to determine “the extent and timing of additional adjustments based on the incoming data, the evolving outlook and the balance of risks.”

The quarter-percentage-point cut brings interest rates to a range of 3.5% to 3.75%, the lowest in about three years, in line with market expectations.

A deeper rift within the central bank emerged as three officials dissented. Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeffrey Schmid voted to keep rates unchanged, while Fed Governor Stephen Miran sought a larger half-point cut.

The Fed’s rate-setting committee consists of 12 voting members — including the seven-member Board of Governors, the New York Fed president, and a rotating group of regional Fed presidents.