Analyzing the Deepening Division Within the FOMC Following the 9-3 Vote on the Third Interest Rate Cut of the Year
The United States Federal Reserve’s Federal Open Market Committee (FOMC) approved its third consecutive interest rate cut of the year on Wednesday, December 10, 2025, lowering the benchmark federal funds rate by 25 basis points to a new target range of 3.50% to 3.75%. The decision, which marks the lowest policy rate in nearly three years, was widely anticipated by markets but came with a notable 9-3 split vote, highlighting a deepening rift among policymakers. Fed officials, while acting to support a weakening labor market, signaled that the pace of future reductions is likely to slow as they assess the conflicting risks of persistent inflation and rising unemployment.
The immediate financial impact of the decision was the reduction of borrowing costs, though the full effect remains to be seen. The 25 basis point reduction, following two previous cuts in September and October, brings the total easing this year to 0.75 percentage points. Fed Chair Jerome Powell, in his press conference, stressed that the central bank is "well positioned to wait and see how the economy evolves," indicating that officials are likely to pause further cuts to evaluate the impact of the trio of reductions. The accompanying quarterly economic projections underscored this cautious outlook, with the median forecast suggesting only one additional rate cut in 2026.
The strategic challenge leading to the divided vote captures the fundamental dilemma facing the Fed: the labor market is softening, but inflation remains stubbornly above the central bank’s long term 2% target. The division was stark: two officials voted to keep rates unchanged, concerned that easing too quickly could reignite inflation, while one official voted for a larger, half point cut to more aggressively stimulate the economy and counter the rising unemployment rate, which recently ticked up to 4.4%. This unusual three way dissent, the largest since 2019, signals the high degree of uncertainty policymakers face as they juggle their dual mandate.
Looking ahead, the future outlook for monetary policy is defined by a necessary pause to gather more complete economic data. The Fed’s decision was complicated by the recent government shutdown, which delayed the release of critical official statistics on October and November inflation and employment. Powell stated that these delayed reports, expected in the coming weeks, will be carefully assessed by the FOMC before their next meeting in January. The central bank is operating in a "very challenging situation," and the highly fractured vote reinforces the message that while easing is in effect, future rate movements will be entirely data dependent and significantly slower than the pace seen in late 2025.