The Fed's interest rate is down again: internal divisions are high, three against only six years ago

By Chloe, Challenger

With the end of this year’s last meeting, the Fed announced that it would lower the base rate by 25 basis points, to 3.5 per cent to 3.75 per cent, for the third consecutive period. Since September, the Fed has accumulated 75 basis points. The resolution was adopted by a vote of 9:3 and two members of the opposition supported the maintenance of interest rates and one supported the reduction of interest rates by 50 basis points。

At the same time, the Federal Reserve has initiated a treasury bill scheme to maintain adequate reserves. Reuters reported that the technical purchases of Benbo would begin on 12 December, and that the first round of treasury bills would amount to approximately $40 billion。

The Fed has just decided to end its balance-sheet retrenchment operation in early December, moving quickly to a small expansion of the balance sheet to respond to recent repurchase market pressures and short-term financing market fluctuations。

Powell ruled out the possibility of rising interest rates, emphasizing that the core mission was to maintain the 2% inflation target

According to the policy statement, economic activity has grown modestly, but the job market has weakened, unemployment has risen and inflation remains high. In order to achieve the maximum employment and inflation target of 2 per cent, the Fed has reduced interest rate ranges and will determine future adjustments based on the latest data and risk assessments. The Commission will continue to focus on the labour market, inflation expectations and domestic and foreign financial developments. At the same time, a short-term Treasury debt purchase plan will be initiated to ensure adequate reserves。

At the operational level, the Federal Reserve Council agreed to adjust the relevant interest rates and directed open market operations, including repurchase reinvestments, to support policy implementation。

at the press conference, powell also stated that the decline was due to the fact that inflation was still under upward pressure and that the labour market was starting to weaken, bringing the two goals into play. he stressed that there was no zero-risk policy and that interest rates were now back to “ the broad neutral zone ” the policy position “ well in place ” and allowing officials to observe data more patiently before deciding on the next step, rather than the intended direction. he suggested that the downside risks in the labour market were higher than inflation, and that above-target inflation was mostly driven by tariffs and was temporary。

powell ruled out the possibility of raising interest rates and reaffirmed that the core mission of the fed was &ldquao; maintaining 2% inflation target rdquo; and “ supports employment maximization & rdquo; all adjustments to policy are dependent on this。

In terms of economic outlook, Powell noted that consumption and business investment were robust and that the housing market was weak but generally dynamic. The recent short-term suspension of the federal Government has affected the economy for the current season, but is expected to be partially mitigated next quarter。

ACCORDING TO THE FEDERAL RESERVE ' S LATEST ECONOMIC FORECAST (SEP), GDP GROWTH ESTIMATES FOR THIS YEAR AND NEXT ARE ESTIMATED AT 1.7 PER CENT AND 2.3 PER CENT, RESPECTIVELY. GROWTH NEXT YEAR WILL BE MORE OPTIMISTIC, LARGELY DUE TO THE RESILIENCE OF CONSUMPTION SPENDING, COMBINED WITH HIGHER CORPORATE CAPITAL SPENDING FROM INVESTMENT IN AI-RELATED DATA CENTRES AND EQUIPMENT. IF THE GOVERNMENT CLOSES DOWN, NEXT YEAR GDP WILL GROW BY ABOUT 2.1%。

& ldquo; point & rdquo; shows that most decision makers expect an additional 25 basis points in 2026, the same as the september projection. powell stressed, however, that this was not an indication that the next step would necessarily be to reduce or stop the rate, but rather to expect the outside world to understand that the fed’s next step would depend entirely on economic performance, not on the intended direction。

The Fed's internal divisions have widened, and Trump says the interest rate has been reduced too little

this resolution, however, highlights the extraordinary differences within the fed. the voting in support of the initiative included nine members, including chairman powell, vice-chairman john & middot; williams; the opponents included stephen & middot; milan (50 basis points of preference); and austin & middot; gulsby and jeffrey & middot; and schmidt (a constant trend). this is the first of its kind since 2019。

In addition, not only the two officials mentioned in the statement who did not support the interest rate reduction, but also other decision makers showed hesitation: only four branches of the Federal Reserve had applied for a reduction in the discount rate (the rate charged by the Federal Reserve for commercial bank emergency loans) and six policymakers had preferred to maintain interest rates at 3.75 to 4 per cent at the end of the year in economic forecasts。

The analysis of “ the Fed ' s microphone ” Nick Timiraos suggests that there is a serious split between officials as to whether inflation or the job market should be greater, which may depend on how Powell advances. Powell's term will expire next May, with only three interest rate-setting sessions left。

After the resolution was released, US stock went up in tandem with the debt market, the Dow Jones index went up nearly 500 points, the US public debt return and dollar index went weak, and the exchange market for interest rates predicted a further reduction of about 50 basis points next year. However, the encrypted market has been flat, with bitcoin holding between $900 and $91,000 and utco shaking between $3200 and $3300. The encryption market fear and greed index dropped from 30 to 29。

The President of the United States, Trump, said that the interest rate reduction was too small and could have been greater。