Investors are betting the Federal Reserve will lower interest rates today for the third time this year, though there could be division within the central bank over the decision.
“The decision will not be unanimous and is likely to feature dissents in both a hawkish and dovish direction,” Deutsche Bank chief US economist Matt Luzzetti said.
Where there might be more consensus: on signals that most of the rate cuts are finished — for now.
Today’s decision could draw dissents on both sides from one to as many as five central bankers. Boston Fed president Susan Collins, Kansas City Fed’s Jeff Schmid, Chicago Fed president Austan Goolsbee, and St. Louis Fed president Alberto Musalem have all voiced concerns about inflation, and any of them could oppose a rate cut. At the last meeting, Schmid dissented because he preferred to hold rates steady, arguing that cutting rates further could boost already solid demand in the economy, potentially igniting inflation.
On the flip side, Fed governor Stephen Miran has been vocal that he does not see any inflation from tariffs and expects housing prices to come down, bringing down overall inflation measures. He has repeatedly dissented in favor of cutting by larger increments of 50 basis points and is expected to do so again.
There haven’t been five dissents against a policy decision since May 1983, when Paul Volcker was chair of the central bank.
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“To forge as much consensus for the 25bp rate cut, and thus minimize dissents, we anticipate the statement and Chair Powell’s press conference will signal that the hurdle is relatively high for another cut in early 2026,” Luzzetti said.
Along with the Fed’s policy statement, officials will release interest rate projections for 2026 and an updated economic forecast.
In September, officials penciled in three cuts for this fall and only one cut for 2026. With so much division within the Fed over whether to cut rates further as inflation remains about a full percentage point above the central bank’s 2% goal, 2026 could hold far fewer rate cuts.
Read more: How to maximize your interest earnings following a Fed rate cut
JPMorgan chief economist Michael Feroli expects just one more rate cut next year, noting that he expects the Fed’s interest rate projections to reflect unease about cutting, given that he believes only a slim majority of members favor a rate cut at this meeting.
Feroli said he expects Chair Jerome Powell to stress that with rates close to a neutral level — seen as neither boosting nor slowing economic growth — the central bank has made enough “risk management cuts” and that further cuts would only come with a material deterioration in the job market.
Feroli doesn’t expect Powell to comment directly on the Fed’s upcoming decision in January, but instead emphasized that a lot of data will be released before that meeting that will guide their decision.
Analysts also think the Fed will signal restraint ahead for further rate cuts by reinserting old language into its policy statement. Including phrasing that members will be “considering the extent and timing of additional adjustments” could hint at a pause in January.
The dispersion of views within the Fed is likely to continue through next year, when President Trump is expected to appoint a new Fed chair to replace Powell, whose term ends in May. Whoever is the next chair could have a difficult task of creating consensus for the direction of policy, resulting in fewer rate cuts.
Bank of America senior US economist Aditya Bhave doesn’t expect more than two cuts. He thinks the next Fed chair won’t be able to convince the entire committee to cut rates below 3%.
The Fed decision comes down at 2 p.m. ET, followed by Powell’s press conference at 2:30 p.m. ET.
Jennifer Schonberger covers the Federal Reserve, Congress, the White House, the Treasury, the SEC, the economy, cryptocurrencies, and the intersection of Washington policy with finance. Follow her on X @Jenniferisms and on Instagram.