The Federal Reserve’s December decision to cut its key interest rate by a quarter point was approved despite unusual dissent, and the minutes released Tuesday highlighted disagreements among policymakers about whether the biggest threat to the economy was weak hiring or stubbornly elevated inflation.
At its December 9-10 meeting, Fed officials agreed to lower the rate to about 3.6%, described by the central bank as the lowest in nearly three years. The move was approved by a 9-3 vote, with two officials voting to keep the rate unchanged and one voting for a larger, half-point reduction.
The minutes described a deep split on the 19-member policymaking committee over how to weigh the risks ahead. Members who believed weak hiring was the more urgent concern would typically support more aggressive cuts, while those focused on elevated inflation would be more inclined to hold rates steady or even raise them.
The minutes also indicated that even some officials who supported the rate cut did so with reservations. Some officials wanted to wait for more economic data before taking additional steps, the minutes said. They also noted that key data on jobs, inflation and growth were delayed by a six-week government shutdown, leaving policymakers with less current information at the December meeting.
While the minutes do not identify specific officials, the two dissents in favor of keeping rates unchanged were attributed to Jeffrey Schmid, president of the Federal Reserve Bank of Kansas City, and Austan Goolsbee, president of the Chicago Fed. The third dissent came from Fed governor Stephen Miran, appointed by President Donald Trump in September, who favored a half-point cut.
The Fed’s projections released alongside the minutes also showed divisions in how policymakers expected the path of rates to evolve. Seven officials projected no cuts in 2026, while eight forecast two or more reductions. Four supported just one cut in 2026, according to the minutes.
The minutes noted that a weaker job market would likely prompt the Fed to reduce borrowing costs more quickly over time, even as other factors can influence what consumers pay. Two weeks ago, the government reported that employers cut about 40,000 jobs in October and November, and the unemployment rate rose to 4.6%, described as a four-year high.
Inflation, meanwhile, remained above the Fed’s 2% target, complicating the central bank’s decisions. In November, annual inflation cooled to 2.7% from 3% in September, but economists said the most recent readings were likely distorted by the shutdown, which forced the government to estimate many price changes instead of measuring them directly.
After the Dec. 10 meeting, Fed Chair Jerome Powell said the Fed cut rates out of concern that the job market is even weaker than it appears. Powell said the government data showed the economy added just 40,000 jobs a month from April through September, adding that figure could be revised lower by as much as 60,000, which would mean employers shed an average of 20,000 jobs a month during that stretch.
“It’s a labor market that seems to have significant downside risks,” Powell told reporters. “People care about that. That’s their jobs.”