Interest Rates

Federal Reserve officials voted to cut interest rates today – for the third consecutive time – but signaled little appetite for future cuts amid unusual internal divisions over whether inflation or the job market should be their bigger worry.

Further suggesting officials see little reason to accelerate the pace of easing, new projections also released today, the so-called “dot plot,” showed a majority of officials penciled in at least one reduction next year. The dot plot aggregates what all 19 officials forecast will happen to borrow costs over the coming years.

The Fed voted 9-3 for the reduction today and in another rare sign of internal disaccord, for the first time in six years, three officials cast dissents.  Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeff Schmid thought the reduction wasn’t warranted. Newly appointed Fed governor Stephen Miran favored a larger, half-point cut.

This was also the fourth straight vote that was not backed by all members of the 12-person Federal Open Market Committee.

The root of the disagreement inside the Fed stems from differing perspectives on whether to be more concerned about the prospects of inflation getting stuck above the central bank’s two-percent target, or the possibility that the labor market is on the cusp of cracking.  What has made those judgment calls especially difficult recently is the fact that officials have lacked access to crucial government data releases because of the government shutdown that ended last month.