AILSA CHANG, HOST:
The Federal Reserve voted to cut its benchmark interest rate today for the third time since September, and that will make it cheaper to borrow money to buy a car or to grow a business or carry a balance on a credit card. The decision was not an easy one. Fed policymakers are unusually divided over which is the more urgent concern - a weakening job market or rising prices. NPR's Scott Horsley joins us now. Hi, Scott.
SCOTT HORSLEY, BYLINE: Hi, Ailsa.
CHANG: Hi. OK, so I understand that today's decision by the Fed was more contested than usual. Why was that?
HORSLEY: Well, I just think it speaks to the uncertain economic times we're in right now. You know, the job market does look as if it's softening, but inflation's still higher than most of us would like. So the Fed is kind of caught in this tug-of-war. Does it lower interest rates to try to prop up the job market or keep rates high to battle inflation? Fed chairman Jerome Powell says it was not a slam dunk either way.
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JEROME POWELL: Everyone around the table agrees that inflation is too high and that we want it to come down, and agrees that the labor market has softened and that there's further risk. Everyone agrees on that. Where the difference is is how do you weight those risks and what does your forecast look like?
HORSLEY: In the end, a majority of the rate-setting committee voted for a quarter-point rate cut, which was the third in a row. But Fed officials also signaled they expect to be cautious about lowering rates any more. On average, they expect just one more quarter-point rate cut in 2026.
CHANG: OK. So a majority favored the rate cut, but what about the other committee members?
HORSLEY: Yeah. There were three dissenting votes, and they came from both sides. Two members of the committee wanted to hold rates steady today, and a third wanted to go with an even bigger half-point rate cut. Now, that's unusual for a group that usually tries to operate with a lot of consensus. In fact, it's the first time in six years that there was this much disagreement on a rate vote. But Powell says, look, that's OK.
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POWELL: These are good, thoughtful, respectful discussions. It's a close call. We have to make decisions. You can't do two things at once.
HORSLEY: The committee was somewhat hampered by a lack of information. You know, because of the six-week government shutdown, we never got unemployment or inflation numbers for October.
CHANG: Right.
HORSLEY: And November's data is delayed until next week. So committee members had to rely on kind of stale numbers from September, along with whatever private-sector and anecdotal information they could lean on. The Fed was not exactly flying blind, but it did have some blinkers on.
CHANG: OK. Well, the Fed has been under a lot of pressure from President Trump to cut rates more aggressively. Is that pressure campaign having any effect, do you think?
HORSLEY: Not the kibitzing part of the campaign. You know, Trump has been very critical of Powell and his colleagues. But Powell says they make their decisions based on what they think's best for the economy, not political pressure. But Powell is nearing the end of his term as Fed chairman. He's going to oversee just three more rate-setting meetings between now and May. And after that, he will be replaced by a new Fed chairman of the president's choosing. Powell was asked today about what he wants his legacy to be, and the Fed chairman said he's really just focused on doing a job.
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POWELL: I really want to turn this job over to whoever replaces me in - with the economy in really good shape. That's what I want to do. I want inflation to be under control, coming back down to 2%, and I want the labor market to be strong.
HORSLEY: Now, Powell has not said whether he plans to stay on the Fed board after his term as chairman ends. He could serve for another couple of years. That would be unusual, but it would deny the president the opportunity to install another loyalist on the Fed board and possibly help to preserve some of the central bank's independence.
CHANG: That is NPR's Scott Horsley. Thank you, Scott.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
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