The divided Fed approves the third rate cut of the year and foresees a slower pace ahead.

The Fed approved the third rate cut of 2025, but the decision revealed a divided and much more cautious central bank moving forward. The base rate fell by another 0.25 points, to the range of 3.5% to 3.75%, in a vote marked by three dissents — something rare that shows the level of uncertainty within the committee itself.

While some members advocated for a larger cut to avoid economic slowdown, another group preferred to maintain interest rates, concerned about inflation still above the target. The final consensus was a moderate cut, accompanied by a clear warning: new adjustments will only come if the data justifies it.

Chairman Jerome Powell stated that the Fed is now entering observation mode, emphasizing that the institution wants to see how the economy reacts before deciding the next step. The projection graph itself makes this evident: only one cut expected for 2026 and another for 2027, signaling a much slower cycle from here on.

Despite the easing, the scenario is not simple. Inflation remains persistent, indicating that the battle is not yet over, and the labor market shows mixed signals, with weak hiring and moderate layoffs. To reduce tensions in the funding markets, the Fed also announced that it will resume buying Treasury securities in the coming months.

Uncertainty increases with the impending change in the Fed's presidency. Donald Trump intends to appoint a new leader aligned with lower interest rates, which could reshape the course of monetary policy.

In summary: the Fed cut, but made it clear that the easing cycle is nearing its limit. The next round of decisions will directly depend on economic data and the new leadership that will take command of the central bank.