The Federal Reserve just cut interest rates by 25 basis points, but don’t mistake this for a routine move. Beneath the headline cut is a rare and growing split inside the world’s most powerful central bank.
The Federal Open Market Committee lowered the federal funds rate to a 3.50%–3.75% range, marking its third straight quarter-point cut. What stood out wasn’t the reduction—it was the disagreement.
Two regional Fed presidents voted against cutting at all, arguing rates should stay put. Meanwhile, Fed Governor Stephen Miran went the other direction entirely, pushing for a larger 50-basis-point cut. The result: a 9–3 vote, an unusually fractured outcome for a body known for consensus.
Markets Heard the Cut—but Watched the Cracks
Bitcoin hovered around $92,400 after the announcement, showing short-term volatility. U.S. equities edged higher, while the 10-year Treasury yield slipped to 4.15%. With this move, short-term borrowing costs are now at their lowest level since 2022.
But markets weren’t just reacting to the rate cut. They were reacting to what it signals: uncertainty.
In its statement, the Fed acknowledged that economic uncertainty remains elevated and warned that downside risks to employment are rising. At the same time, officials announced plans to restart purchases of short-term Treasury securities to maintain adequate reserve balances, essentially a form of “QE-lite.”
That’s an important clue. When a central bank cuts rates and steps in to manage liquidity, it’s signaling caution, not confidence.
Forecasts Improved
Updated projections showed modest optimism. The Fed now expects core inflation at 3% in 2025 and 2.5% in 2026, both slightly lower than previous forecasts. GDP growth was revised higher to 1.7% this year and 2.3% next year.
Yet despite these improvements, the Fed’s dot plot barely budged. Policymakers still see just one rate cut in 2026, even as markets are pricing in two. That disconnect is where volatility lives.
Kansas City Fed President Jeffrey Schmid and Chicago Fed President Austan Goolsbee voted to hold rates steady, echoing concerns they’ve raised publicly in recent weeks. Their opposition highlights a growing rift over how fast—and how far—the Fed should ease.
Some members didn’t just oppose this cut. They opposed the October cut as well. That’s a sign the internal debate isn’t cooling down, it’s intensifying.
What Comes Next Is Still a Guess
Before the decision, traders priced in just a 24% chance of another cut in January, according to CME FedWatch. Complicating matters, the Fed is operating without several key economic data points still delayed by the recent government shutdown.
Add in ongoing criticism of Chair Jerome Powell from President Trump, who is already searching for Powell’s replacement—and you get a policy environment filled with political and economic crosscurrents.
Yes, the Fed cut rates. But the bigger takeaway is uncertainty.
With inflation still sticky, labor markets showing cracks, and policymakers openly divided, the path forward is anything but clear. The return of Treasury bill purchases adds another layer of stimulus—but also another question mark.
For markets, this isn’t a green light. It’s a warning sign that the Fed itself isn’t sure what comes next.
