Fed cuts rate to 3.5%–3.75% amid three dissents; NY Fed to buy $40B in T‑bills
The Federal Reserve cut the target federal funds rate by 25 basis points to 3.50%–3.75%—its third straight cut—despite three dissents (Austan Goolsbee and Jeff Schmid wanted to hold, while Stephen Miran favored a larger half‑point cut) and released projections penciling in just one more cut in 2026 with 2026 GDP growth seen at about 2.3% and PCE inflation around 2.4%. To keep reserves ample the New York Fed will buy roughly $40 billion of short‑term Treasury bills starting Friday, and markets reacted with modest stock gains while Treasury yields eased; Chair Powell will hold a press briefing this afternoon.
📌 Key Facts
- The Federal Open Market Committee cut the federal funds target range 25 basis points to 3.50%–3.75% — its third straight cut and the policy rate's lowest level since early November 2022.
- The decision drew three formal dissents (Austan Goolsbee and Jeff Schmid favored holding; Stephen Miran favored a larger 50‑bp cut), the most dissents in six years; Axios also reports six of 19 officials expressed 'shadow dissents' indicating they would have preferred to hold.
- The Fed's updated Summary of Economic Projections pencils in only one additional rate cut in 2026 and forecasts 2026 PCE inflation at about 2.4%, real GDP growth around 2.3% (up from prior), and unemployment near 4.4%.
- To maintain ample reserves, the Fed said it will buy short‑term Treasuries as needed; the New York Fed plans to start buying roughly $40 billion in T‑bills beginning Friday.
- Shutdown‑related data delays have left the Fed relying on older readings (e.g., September PCE inflation 2.8% and unemployment 4.4%) and created backlogs in jobs and inflation reports; some officials (and outside economists) say they may wait for more incoming data — possibly delaying the next move until March.
- Markets reacted modestly: stocks ticked higher (S&P 500 +0.4%, Dow +386 points, Nasdaq +0.1% mid‑afternoon ET) while Treasury yields eased (10‑year ~4.16%, 2‑year ~3.56%).
- Powell will hold a post‑decision press conference at 2:30 p.m. EST; separately, governance questions loom — Powell's chair term expires in May, a new chair is expected to be nominated, and the Supreme Court will hear arguments next month after a challenge to President Trump's effort to replace Fed Governor Lisa Cook was blocked.
📊 Relevant Data
In September 2025, the unemployment rate was 3.8% for White Americans (58% of population), 7.5% for Black Americans (13% of population), 5.5% for Hispanic Americans (19% of population), and 4.4% for Asian Americans (6% of population).
The Employment Situation - September 2025 — U.S. Bureau of Labor Statistics
In 2023, the poverty rate was 7.7% for non-Hispanic White Americans (58% of population), 17.1% for Black Americans (13% of population), 16.9% for Hispanic Americans (19% of population), and 9.8% for Asian Americans (6% of population).
Poverty in the United States in 2023 — Congressional Research Service
In 2023, the median household income was $89,050 for non-Hispanic White households (58% of population), $56,490 for Black households (13% of population), $65,540 for Hispanic households (19% of population), and $112,800 for Asian households (6% of population).
Median Income of Non-Hispanic White Households Increased While Asian, Black and Hispanic Median Household Income Did Not Change — U.S. Census Bureau
📰 Sources (6)
- Stocks edged higher after the cut: S&P 500 +0.4%, Dow +386 points, Nasdaq +0.1% as of mid‑afternoon ET.
- Treasury yields slipped: 10‑year at 4.16% (from 4.18%), 2‑year at 3.56% (from 3.61%).
- Fed projections show a median of one additional rate cut by end‑2026, unchanged from three months earlier.
- Dissent breakdown: two officials opposed any cut now; one dissented in favor of a larger 50 bp cut.
- Notable movers tied to the session: GE Vernova +15.4% after raising 2028 revenue outlook, doubling the dividend, and expanding buybacks; Palantir +3.9% on a U.S. Navy AI program worth $448 million; Cracker Barrel cut its fiscal‑year revenue outlook despite a quarterly beat; GameStop missed on revenue.
- FOMC’s Summary of Economic Projections: PCE inflation projected at 2.4% in 2026 (down from a 2025 median estimate of 2.9%).
- FOMC projects 2026 real GDP growth at 2.3%, up from a prior 1.8% forecast, and unemployment at 4.4% in 2026 (unchanged from current).
- Fed signals only one rate cut penciled in for 2026.
- The 0.25-point move brings the funds rate to its lowest level since early November 2022.
- Three dissents are the most in six years, underscoring internal divisions on policy.
- Context cited: ADP data showing private payrolls fell by 32,000 in November amid data gaps from the shutdown.
- FOMC cut the federal funds target range to 3.5%–3.75%, the third cut this year.
- Three dissents: Austan Goolsbee and Jeff Schmid favored holding rates; Stephen Miran favored a larger cut.
- Six of 19 Fed officials indicated it would have been appropriate to hold rates ('shadow dissents').
- Fed will purchase short‑term Treasuries as needed to maintain ample reserves; NY Fed anticipates buying ~$40B in T‑bills starting Friday.
- Median Fed projection shows only one additional cut in 2026; seven of 19 officials see rates ending 2026 at or above current levels.
- Updated projections: median 2026 GDP growth 2.3% (up) and inflation 2.4% next year (down from prior).
- Powell will hold a press conference at 2:30 p.m. EST today following the decision.
- A third consecutive cut would place the policy rate around 3.6%, the lowest in nearly three years.
- The Fed will release quarterly economic projections today; economists expect just one rate cut in 2026, though a new chair could push for more.
- AP quotes Wells Fargo’s Tom Porcelli saying the Fed would prefer to skip a January cut and wait for more inflation data, potentially pushing action to March.
- Shutdown-related data delays mean the Fed enters January with multiple months of backlogged jobs and inflation reports to review.
- NPR specifies the latest available readings the Fed is relying on due to the shutdown: September PCE inflation at 2.8% and unemployment at 4.4%, both slightly higher than the prior month.
- Notes investors are betting a majority of policymakers will back a quarter‑point cut at the end of this meeting.
- Details that Stephen Miran has cast the lone half‑point cut vote at each of the last two meetings.
- Adds governance context: Trump's attempt to replace Fed Governor Lisa Cook has been blocked by the Supreme Court, which will hear arguments next month.
- States Powell’s chair term expires in May and Trump is expected to nominate a new Fed chair soon.
- Recalls that in September, Fed officials projected on average just one additional rate cut in 2026.