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The Federal Reserve cut its key interest rate by a quarter point on Wednesday (December 10), marking the third reduction this year. This decision aims to balance rising inflation with a weakening labor market. The new rate range is 3.5 to 3.75 percent, the lowest in three years. Nine of the 12 Federal Open Market Committee members supported the cut, while three opposed it. Stephen Miran, appointed by President Donald Trump, wanted a larger cut, while Jeffrey Schmid and Austan Goolsbee preferred no change.
The cut could make borrowing cheaper for Americans with mortgages, credit card debt, or personal loans. However, the Fed remains divided on whether inflation or the labor market poses a greater threat. Limited data from a recent government shutdown has made decision-making challenging.
The rate cut aims to support the labor market, even as inflation stays above the Fed's 2 percent target. The move is expected to lower borrowing costs, but its immediate impact may be limited. According to Bankrate, the cumulative effect of multiple cuts could lead to significant savings for borrowers over time.
The Fed's decision reflects ongoing debates about economic risks, with some officials concerned about inflation and others focused on employment. The lack of recent economic data has fueled these disagreements. Despite the divisions, the Fed aims to navigate the complex economic landscape while providing relief to consumers.