Federal Reserve Cuts Rates for Third Time in a Row, Trump-Appointed Economist Pushes for More
The Federal Reserve’s decision to lower its benchmark interest rate by 0.25 percentage points for the third consecutive time underscores a significant shift in monetary policy. This latest action brings the federal funds target range down to 3.5% to 3.75% and reflects the Fed’s attempt to navigate an economy struggling with inflation and labor market fragility. With a total reduction of 1.75 percentage points over the past year, it’s clear the Fed is leaning towards monetary easing.
However, the decision wasn’t unanimous. Stephen Miran, a former Fed official from the Trump administration, expressed his disagreement with the majority, advocating for a more aggressive 0.5 percentage point cut. His dissent highlights rising skepticism among fiscal conservatives who feel the Fed’s current approach falls short of addressing economic stagnation. Miran’s statement resonates with those advocating for bolder monetary policies, a sentiment echoed in a tweet celebrating his stance and calling for continued rate cuts into the next year.
Data Gaps and Government Shutdowns Complicate Fed Policy
The need for decisive action from the Fed follows a turbulent year marked by a prolonged government shutdown that disrupted the flow of vital economic data. The 43-day shutdown in the fall of 2025 forced the Fed to make decisions based on incomplete data. With limited upward visibility on employment and inflation numbers, the Fed relied heavily on outdated information. Analysts noted this as akin to “flying blind,” complicating the policymakers’ ability to balance inflation control against job growth needs.
The divergence in opinions among Fed officials reveals a deeper rift. While some focus on the pressing need to curb inflation—which remains stubbornly above the 2% target—others urge immediate action to stimulate job growth in an economy already teetering on the edge of stagnation. As consumer spending weakens and strong hiring signs remain elusive, the latter viewpoint is gaining traction within the committee.
Winners and Losers from the Latest Cut
The impacts of the Fed’s latest cut are widespread. Homeowners with adjustable-rate mortgages stand to benefit as monthly payments decrease, leading to potential savings. For instance, a $500,000 mortgage could yield nearly $580 less per month now compared to the peak in 2024. While this is good news for borrowers, the picture is less rosy for savers. Interest rates on savings accounts and CDs have declined sharply, with short-term CDs falling from over 5% last year to around 4.2% now, with predictions of further reductions in 2026.
Retirees relying on fixed-income investments face similar challenges. Lower interest rates mean reduced bond yields, affecting monthly payouts and eroding capital without taking on more risk. Additionally, while credit card rates are beginning to decline, they still hover around a troubling 19.8% average APR, with many consumers facing rates exceeding 25%. This scenario leaves many working-class Americans grappling with high borrowing costs, despite the Fed’s attempts to lower underlying rates.
Investors Take Bullish View Despite Division Within the Fed
The market response to the Fed’s decision was largely positive, with stock indexes rising following the announcement. Investors are betting that lower interest rates will spur corporate earnings and encourage capital investment. Growth and technology stocks particularly benefited, poised to thrive on cheaper borrowing costs. However, the U.S. dollar experienced a slight depreciation, reflecting an ongoing trend against other currencies and raising concerns over import-driven inflation—a paradox in contrast to the Fed’s inflation-fighting efforts.
Voices from the Field: Advice from Financial Experts
The current economic environment has prompted experts to offer timely insights. Michele Raneri from TransUnion advises consumers to act quickly if refinancing is on the table, emphasizing the unpredictability of rate conditions. “You don’t know when that music is going to stop; it just stops,” she remarked, underscoring the need for consumers to seize opportunities before they vanish.
Financial coach Bernadette Joy takes a different yet crucial angle, prioritizing debt management over saving potential. She emphasizes the need for cash to have a purpose, warning that high-interest debt should be paid off first. This approach provides guaranteed returns and lessens the risks associated with investing during volatile times. Stephen Kates from Bankrate added that 2025 has been fruitful for investors who have maintained diversified portfolios while cautioning against chasing returns without solid fundamentals.
Political and Strategic Implications
The discord expressed by Miran suggests not just a technocratic disagreement but a politically charged atmosphere surrounding monetary policy as the 2026 elections loom. His call for a more pronounced rate cut isn’t only about numbers; it’s intertwined with broader fiscal conservative arguments advocating for aggressive monetary actions to stimulate business investment and consumer recovery from years of sluggish growth.
The push for further easing shows no signs of fading. Backers of deeper cuts believe the Fed should act proactively, addressing deteriorating job numbers and persistent underemployment head-on. Critics, however, express concerns about the dangers of reigniting inflation, especially with tightening global oil markets and geopolitical tensions affecting supply costs.
The road ahead for the Fed remains fraught with challenges. Chair Jerome Powell’s term is set to end in May 2026, and the decisions made in the coming months will significantly shape his legacy. As the next FOMC meeting approaches, observers will carefully assess whether the Fed will respond to demands for continued cuts and how that will ripple through the economy.
Ultimately, the stakes for American households, businesses, and retirees remain high. Each rate decision carries significant weight, extending beyond financial markets to impact daily lives, mortgage payments, credit burdens, and retirement savings on Main Street.
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