At a Glance
- Fed cut key rate to 3.6% with 9-3 vote.
- Deep split over inflation vs job market concerns.
- Minutes reveal 19-member debate and delayed data from shutdown.
- Why it matters: The decision signals uncertainty in monetary policy and shows how economic data gaps influence Fed actions.
The Federal Reserve’s December 9-10 policy meeting ended with a 0.25-point rate cut to about 3.6%, but the move was far from unanimous. Minutes released Tuesday show a committee split over whether weak hiring or stubborn inflation is the bigger threat, and how recent data delays from a six-week shutdown may have swayed opinions.
Fed Meeting Decision
The Fed lowered its policy rate by a quarter point for the third time this year, bringing it to roughly 3.6%. The action passed with a 9-3 vote-an unusual level of dissent for a body that normally reaches consensus.
Internal Divisions
Minutes reveal that 19 members discussed the policy, but only 12 voted on the rate. Three officials dissented: Jeffrey Schmid, Austan Goolsbee, and Stephen Miran. Schmid and Goolsbee favored keeping the rate unchanged, while Miran pushed for a larger half-point cut.
Key Concerns
- Inflation still above the Fed’s 2% target.
- Job market showing signs of weakness.
- Data gaps from the six-week shutdown.
Economic Data Context
The Fed’s debate hinged on whether the economy faces a sluggish job market or persistent inflation. Recent figures show employers cut about 40,000 jobs in Oct-Nov, and the unemployment rate rose to 4.6%, a four-year high. Inflation cooled to 2.7% in November from 3% in September, but shutdown-related estimates may distort the numbers.
Fed Projections
| Projection | 2026 Cuts |
|---|---|
| No cuts | 7 |
| Two or more | 8 |
| One cut | 4 |
Powell’s Commentary
President Jerome Powell stated:
> “It’s a labor market that seems to have significant downside risks.”
Powell added:
> “People care about that. That’s their jobs.”
Key Takeaways
- The Fed cut rates despite deep disagreement over inflation versus hiring.
- Minutes highlight a split over the biggest threat: weak hiring or high inflation.
- Data delays from the shutdown left officials with outdated information.
The Fed’s decision underscores the fragile balance between stimulating employment and curbing inflation, with policy makers still divided on the path forward.
