Fed Cuts Rates by 25 Basis Points With Three Dissents

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00:00Let's get to Bloomberg's Michael McKee with that Fed rate decision.

00:03The most divided Fed since before the pandemic voted to lower the benchmark rate by 25 basis

00:09points as investors expected. But there were three descents for the first time since 2019.

00:15And on the dot plot, a total of six members of the committee suggested they were not in favor

00:20of lowering rates. There's also a hawkish line in the statement. In considering the extent and

00:26timing of additional adjustments to the target range, bringing back language from a year ago

00:31when they paused their first round of rate cuts. No surprise, Stephen Myron wanted a half point

00:36reduction. But in something of a surprise, Austin Goolsbee joined Jeffrey Schmidt in dissenting for

00:42no cut at all. Next year's dot plot suggests just one cut coming. Seven members want no move, however,

00:50including three who think the rate might go up. The committee statement says economic activity

00:56has been expanding at a moderate pace. And the latest forecasts show a consensus GDP figure of

01:021.7 percent for this year. But in a big move up, they have revised growth forecasts for 2026 to 2.3

01:11percent. Unemployment forecast to finish this year at four and a half percent will fall back to

01:164.4 percent next year. Using identical language from October, the statement says job gains have slowed

01:22this year and the unemployment rate has edged up through September. Nodding to the government shutdown

01:29caused absence of data. The statement repeats that more recent indicators are consistent with these

01:35developments. There's no change in the inflation assessment. It has moved up since earlier in the year

01:40and remains somewhat elevated. However, it is seen slowing markedly next year. PCE headline from 2.9 percent

01:47this year to 2.4 percent in 2026. And as always, they won't reach their 2 percent target for two more

01:55years in 2028. Core PCE will finish the year at three percent, falling to two and a half percent next

02:02year. As for the balance sheet, the statement now says reserve balances have declined to ample levels.

02:09The Fed will buy shorter term treasuries, mostly bills, but up to three year notes as needed to maintain

02:15that ample supply. The first operation will be announced tomorrow with the first purchases

02:20on Friday of approximately 40 billion dollars in treasury bills.