Divided Fed Cuts Rates Again

The Federal Reserve cut its key interest rate for the third time in a row on Wednesday, bringing it down another quarter-point to around 3.6%.

• "Available indicators suggest that economic activity has been expanding at a moderate pace," the central bank said in a statement. "Job gains have slowed this year, and the unemployment rate has edged up through September. More recent indicators are consistent with these developments. Inflation has moved up since earlier in the year and remains somewhat elevated." The Fed added: "Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months."

• The move was widely expected despite a lack of fresh data, but investors will be closely watching Fed Chair Jerome Powell's remarks for signals on how many rate cuts—if any—are expected next year. "Inflation is not back to 2% so they're going to need to keep policy somewhat restrictive if they are going to put downward pressure on inflation," former Cleveland Fed President Loretta Mester told CNBC on Tuesday. "Right now, inflation is pretty well above the goal, and it's not just all tariff-driven."
• But the Fed's projections may carry less weight than usual, since President Trump is expected to appoint a new Fed chair next year who will support his call for deeper cuts to interest rates, the AP reports. "It could be a hinge moment," former senior Fed adviser Vincent Reinhart tells the Journal. "The Fed is going to get more political, and a more political Fed will cut rates as much as it can."

• The Fed is currently unusually divided, the Wall Street Journal reports. Five out of 12 voting members of the Fed's policy committee have said in speeches or interviews that there isn't a very strong case for cutting rates. The Fed said in its Wednesday statement that three committee members dissented from the latest decision, with two favoring no rate cut and one favoring a half-point cut.