President Donald Trump said Wednesday that the Federal Reserve’s latest quarter-point rate cut to 3.6 percent fell far short of what he wanted, calling the move a “rather small number” and arguing it should have been at least twice as large.
The Federal Reserve lowered its key interest rate for the third straight meeting but signaled it may pause further reductions in the months ahead, a stance that could put the central bank at even bigger odds with Trump.
Why It Matters
The benchmark rate is at the lowest level in nearly three years — while indicating in new projections that they expect only one additional reduction next year. In a statement after its two-day meeting, the Fed’s rate-setting committee said it may keep rates unchanged for some time as officials assess incoming economic data.
What To Know
Trump accused the central bank of restraining economic growth by keeping borrowing costs higher than he prefers, saying officials are “so afraid of inflation” that “they kill the growth.”
The president argued that deeper cuts would spur stronger expansion and said any resulting inflation could be addressed later, adding, “We should be able to do a lot better than 3 or 4%.”
Trump said, “We have to get a mindset that when the country is doing well, you don’t want to kill the growth. That’s what they’re doing. They kill the growth because they’re so afraid of inflation. But you can have tremendous growth without inflation. Everything goes up with the growth. But that’s not inflation.”
The guidance underscores the central bank’s challenge in navigating elevated inflation, slowing job growth and political pressure as Trump prepares to name a successor to Chair Jerome Powell when Powell’s term ends in May. The president has repeatedly urged the Fed to slash rates more aggressively and signaled he wants a new chair who will do so.
The Supreme Court in January will hear arguments over President Trump’s attempted but disputed removal of Federal Reserve Governor Lisa Cook, a case that could free up a second seat for Trump to fill with an ally favoring easier monetary policy.
Wednesday’s decision exposed the deepest internal divisions at the Fed in six years. Three officials dissented — two favoring no cut at all, and Stephen Miran, a Trump appointee, advocating for a larger half-point reduction. The split reflects a stark divide between policymakers who believe lower rates are needed to support hiring and those who argue inflation remains too high to justify easing.
In their quarterly projections, members of the 19-person committee offered widely different views on the year ahead: Seven forecast no cuts in 2026, eight penciled in two or more, and four supported just one. Only 12 members vote on rate changes.
The Fed’s decision comes amid persistent frustration among Americans over high prices for essentials such as groceries, rent and utilities. Inflation has cooled sharply from its peak three years ago but remains elevated. A government report released last week showed the Fed’s preferred inflation gauge rose 2.8 percent in September from a year earlier. Since 2020, consumer prices have climbed roughly 25 percent — progress compared with earlier spikes but still burdensome for many households.
At the same time, the job market is losing momentum. Job gains have slowed substantially this year, and unemployment has risen for three straight months to 4.4 percent, the highest level in four years. While layoffs remain low, many economists describe a “low hire, low fire” labor environment that complicates the Fed’s efforts to cool inflation without triggering a sharper downturn.
The central bank is also grappling with limited economic data after the government shutdown delayed two months of jobs and inflation reports. By its late-January meeting, officials expect to have up to three months of backlogged figures. If those reports show further weakening in the labor market, the Fed could consider another cut. But if hiring steadies while inflation remains elevated, policymakers may opt to hold rates steady for several months.
The political backdrop is adding further uncertainty. Trump has indicated he could name a new Fed chair as early as this month, and he has openly stated that immediate rate cuts are a litmus test for the role. One potential pick, Kevin Hassett, the president’s top economic adviser, has frequently called for lower borrowing costs. But in an interview on CNBC this week, Hassett avoided specifying how many additional cuts he would support, stressing instead that policymakers must “watch the data.”
What People Are Saying
Powell said Wednesday, “We hear loud and clear how people are experiencing really high costs. A lot of that isn’t the current rate of inflation, a lot of that is embedded high costs due to higher inflations in 2022-2023.”
Powell added, “We just came off an experience where inflation turned out to be much more persistent than anyone expected,” he said, referring to the spike in 2022. “Is that going to happen now? That’s the risk.”
Chris Zaccarelli, chief investment officer for Northlight Asset Management, said in a statement shared with Newsweek, “The Chairman kept the Fed’s options open as he looked ahead to next year’s meetings and likely realizes that his effective leadership may end much sooner than his actual term ends (e.g. January vs May), so he made sure to reemphasize all of the points that were important to him: the Fed wants to operate policy to help all Americans, that they are data-dependent and that given the limited amount of government data (because of the shutdown) and private sector information currently available, the risks to unemployment outweigh the risks to price stability.”
What Happens Next
The Fed’s cautious tone Wednesday highlights how much remains unknown heading into 2026. With inflation still above the central bank’s 2 percent target and job growth slowing, officials are signaling that the path ahead will depend heavily on the next wave of economic indicators — and on who is leading the central bank when Powell’s term expires.
Powell will oversee just three more Federal Reserve meetings before stepping down. On Wednesday, he was asked how he views his legacy.
“I really want to turn this job over to whoever replaces me with the economy in really good shape,” he said. “I want inflation to be under control, coming back down to 2%, and I want the labor market to be strong.”
Updates: 12/10/25, 4:34 p.m. ET: This article was updated with new information and remarks.
Updates:12/10/25, 6:44 p.m. ET: This article was updated with new information and remarks.
This article includes reporting by the Associated Press.