The Fed has lowered interest rates by 0.25%, but this decision shows that the internal divisions are very pronounced. The vote was 9 in favor and 3 against, the highest level of opposition since 2019. One person wants a stronger reduction while two want to keep interest rates unchanged. Therefore, many experts are calling this a "hawkish rate cut".
The Fed also signaled that the pace of future rate cuts will slow down. The "dot plot" shows only one cut remaining in 2026 and one in 2027, after which long-term rates will stabilize around 3%. Some officials even want to avoid cutting rates next year.
Inflation remains above the target at 2.8%, and the Fed predicts it won't return to the 2% level until 2028. The GDP forecast for 2026 has been slightly upgraded.
The Fed also announced it would buy back government bonds, starting with $40 billion in short-term bonds to ease pressure in the money market.
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