Federal Reserve set to cut rate but may signal a pause to come

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Written by CHRISTOPHER RUGABER, Associated Press Economics Writer

WASHINGTON (AP) — The upcoming Federal Reserve meeting is expected to be a challenging one for Chair Jerome Powell as he seeks support for a potential third interest rate cut. The latest meeting will test Powell’s ability to navigate a sharply divided 19-member rate-setting committee.

The division within the committee is intensified by the complex economic landscape. While inflation remains high, indicating a need to keep rates steady, weak hiring and a rising unemployment rate typically call for rate cuts. This conflicting data has led to uncertainty among policymakers.

There is speculation that three Fed officials may vote against Powell’s proposed quarter-point cut, marking the most dissenting votes in six years. The potential disagreements highlight the challenging decisions facing the committee.

The debate is further complicated by the lack of official federal data due to the recent government shutdown. The uncertainty surrounding economic indicators could provide a glimpse into the future of the Fed after Powell’s tenure ends in May.

While most economists anticipate a “hawkish cut” at the upcoming meeting, there are concerns about the potential impact of dissenting votes on market confidence. The upcoming meeting could set the tone for future Fed decisions under new leadership.

FILE – A seal is seen before Federal Reserve Chairman Jerome Powell walks out to speak during a news conference following the Federal Open Market Committee meeting, Sept. 17, 2025, at the Federal Reserve Board Building in Washington. (AP Photo/Jacquelyn Martin, File)

While Powell has faced criticism from President Trump, the focus remains on balancing inflation and employment goals. The upcoming meeting will likely address concerns about the job market while considering the impact of potential rate cuts.

Despite the challenges, the Fed is expected to proceed cautiously, signaling a possible pause in rate adjustments to assess the economy’s health. The decisions made at the upcoming meeting will have significant implications for future monetary policy.