Divided Fed ponders US interest-rate cut at end of tumultuous year

"A divided Federal Reserve meets this week to decide whether to cut interest rates, the US central bank's last meeting at the end of a tumultuous year. The US central bank faces a number of unique challenges as it weighs its latest interest-rate decision. After the six-week government shutdown briefly shuttered the Bureau of Labor Statistics, the federal agency that collects economic data on prices and employment, Fed officials have less data to make their decision."

"Making matters more complicated is what appears to be growing internal division among the committee's voting members, who are split on whether there should be a third rate cut before the end of the year. Rates currently sit at a range of 3.75% to 4%. Although the committee started cutting the decades-high interest rates last fall, a majority consensus held off on cuts in the first half of the year, citing economic uncertainty from tariffs."

"The Fed has a dual mandate to stabilize prices and the labor market. Raising interest rates can steady prices: the Fed pushed rates up quickly when inflation hit 9.1% in 2022. But if the central bank isn't careful, high interest rates can push up unemployment. The risk means setting interest rates is a delicate balancing act that has huge repercussions on the economy."

A divided Federal Reserve approaches its final meeting of the year facing constrained data after a six-week government shutdown briefly shuttered the Bureau of Labor Statistics. Officials are split on whether to deliver a third rate cut, with policy rates currently at 3.75%–4%. The committee cut rates by a half-point in September and October after earlier pausing amid tariff-related uncertainty. Markets expect another cut, but internal disagreement makes the outcome uncertain. Inflation rose from 2.3% in April to 3% in September while unemployment climbed from 4% to 4.4%, creating competing pressures on the Fed's dual mandate.

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