In a split environment, the Federal Reserve executed the long-anticipated 25 basis point interest rate reduction on Wednesday, lowering the rate from 4 percent to 3.75 percent, with the range now between 3.50 percent and 3.75 percent.

This move indicates that any future rate cuts will hinge on clearer indications regarding the job market’s direction and inflation trends.

The forecast for 2026 remains consistent with the projections made in September concerning a quarter-point cut, while the market continues to maintain an optimistic outlook for two rate cuts.

The anticipated inflation rate is expected to slow to 2.4 percent, with the unemployment rate projected to hover around 4.4 percent by the end of next year.

Given the unresolved tariff issues and the lack of timely or sufficient data to support decisions, the Federal Reserve is likely to welcome continued growth and may be willing to accept slightly elevated inflation levels.

The voting breakdown of 9-3 reflects significant divisions, a rarity, as two members opposed the rate cut while one advocated for a more substantial reduction.

However, by the latter half of 2026, circumstances may shift, especially as Donald Trump and his administration push for a larger rate cut.

It will be interesting to see if the US........

© Business Recorder