Takeaways: Powell says the Fed has delivered enough rate cuts for now

By Bryan Mena, CNN

Washington (CNN) — The Federal Reserve on Wednesday lowered interest rates again in a continued effort to keep the labor market intact, despite objections from several key Fed officials who believe the central bank should be prioritizing the higher cost of living instead.

However, it may be the last rate cut in a while.

In a post-meeting news conference, Chair Jerome Powell said additional rate cuts will be tougher to justify, frequently stressing that central bankers have now lowered rates three times this year.

“We are well positioned to wait to see how the economy evolves,” Powell said.

A majority of policymakers voted to lower the benchmark lending rate by a quarter point for the third consecutive time, to a range of between 3.5% to 3.75%, the lowest in more than three years.

Wednesday’s decision drew three dissents — from Fed Governor Stephen Miran, Kansas City Fed President Jeffrey Schmid and Chicago Fed President Austan Goolsbee — the highest number of dissents since September 2019.

It’s also the fourth consecutive meeting that a Fed decision wasn’t unanimous, the longest stretch since 2019.

In their latest economic projections, Fed officials penciled in just one rate cut next year, unchanged from their estimate in September. However, their latest policy statement suggests they’re leaning toward staying on hold in the near term, stating they will “carefully assess” the “extent and timing” of any additional cuts.

Powell confirmed that interpretation of the statement when speaking with reporters.

Powell on the divided Fed

This year’s rate cuts have been in response to mounting signs of a weakening labor market, including unusually slow job growth and higher unemployment among young people and minorities.

But those decisions haven’t been easy, with the Fed’s powerful rate-setting committee starkly divided on how to proceed with interest rates. While job growth has been stagnant, inflation remains well above the Fed’s 2% target and is widely expected to creep higher next year as President Donald Trump’s tariffs pack a bigger punch.

Fed officials are in disagreement in Powell’s final few meetings at the helm of the central bank, clashing over which side of their dual mandate to prioritize: full employment or stable prices.

When asked whether the heated Fed debate can be counterproductive or even negative, Powell said policymakers have had “thoughtful, respectful discussions.”

Miran cast a dissenting vote, just he did in the prior two meetings, backing a larger, half-point cut instead. Schmid, who also dissented at the prior meeting, again preferred to keep rates unchanged, this time joined by Goolsbee.

But the unusual division among Fed officials isn’t necessarily a bad thing, as Powell noted during his news conference. Several experts have told CNN that some level of disagreement moderates the Fed’s behavior and shows there isn’t groupthink.

“You have one tool. You can’t do two things at once,” Powell said of the Fed’s tough task of managing interest rates with both sides of its dual mandate under stress.

Still, it makes it more difficult for Wall Street to assess the path of monetary policy.

In the weeks after the Fed’s October decision when officials lowered rates for the second time this year, investors were split over whether there would be another rate cut in December — until New York Fed President John Williams weighed in.

Williams serves in a role that’s historically closely aligned with the Fed chair, and in a November 21 speech, Williams said the bigger risk is around the labor market’s health. Wall Street’s expectations for a December flipped to around 70% from 40% after Williams spoke, according to futures.

Powell on the labor market, inflation and the path forward

Powell said the outlook for interest rates is murky, but the release of economic data that had been delayed by the government shutdown should at least help inform officials for their January meeting.

The Labor Department next week releases inflation and employment data for October and November, which could easily shift the economic narrative in either direction.

This year’s string of rate cuts shows the central bank has been prioritizing the labor market, and Powell said a big reason is that conditions might be weaker under the surface.

“There is an overcount in the payroll job numbers, we think,” Powell said, adding that job growth might even be negative. “I think a world where job creation is negative, I think we need to watch that situation very carefully, and be in a position where we are not pushing down on job creation with our policy.”

Powell said the Fed’s actions to take pressure off the labor market doesn’t indicate the central bank is not concerned with inflation remaining elevated.

“Everyone should understand, and the surveys show that they do, that we are committed to 2% inflation, and we will deliver 2% inflation,” Powell said. “But it is a complicated and usual difficult situation, where the labor market is also under pressure.”

On inflation, Powell blamed the gradual increase in inflation over the past year on Trump’s sweeping patchwork of tariffs, but said officials broadly expect it to result in a one-time increase in the price level.

“It is really tariffs that are causing most of the inflation overshoot,” Powell said. “We do think of those as likely… to be a one-time price increase.”

A new sheriff in town soon

Fed officials’ expectations for just one cut in the coming year is in stark contrast with Trump’s persistent demands for massive rate cuts.

The president has said he’s close to naming the next Fed chair, to succeed Powell once his term ends in May. Trump said Tuesday in an interview with Politico that Powell’s successor will be expected to cut rates, which wouldn’t be easy for that person to accomplish because of the Fed’s structure.

The Fed chair has only one vote and cannot unilaterally veto the majority’s policy decisions, meaning Trump’s pick for Fed chair will have to persuade their colleagues to go along with several more rate cuts.

Two Fed officials who become voters next year – Dallas Fed President Lorie Logan and Cleveland Fed President Beth Hammack – have already expressed in recent public speeches reservations with lowering rates further. Among the Fed’s 12 regional bank presidents, only four get voting power each year on a rotating basis, in addition to the New York Fed president, who has a permanent vote.

When asked by CNN’s Matt Egan on what he would want his legacy as chair to be, Powell said: “I really want to turn this job over to whoever replaces me with the economy in really good shape.”

“I want inflation to be under control, coming back down to 2%, and I want the labor market to be strong. That is what I want,” he added.

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