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The Federal Reserve reduced interest rates by a quarter percentage point Wednesday and scaled back the number of cuts it expects to make next year.
In a split vote, the central bank voted to reduce its benchmark interest rate by 25 basis points to a new range of 4.25%-4.5%, initiating its third consecutive rate cut of 2024 despite signs that inflation isn’t entirely going away.
Newly appointed Cleveland Fed president Beth Hammack objected, preferring not to cut rates. Her dissent marked the second against a policy decision since the Fed started its latest rate-cutting cycle in September.
The consensus among Fed officials is for two rate cuts next year, down from four previously forecast in September.
"Today was a closer call but we decided it was the right call," Powell told reporters at a press conference Wednesday. "It was the best decision to foster achievement of both of our goals," referring to price stability and maximum employment.
"We see ourselves as still on track to cut" in 2025, Powell said, noting that the Fed will need to see further progress on inflation. A rate hike in 2025 "doesn’t appear to be a likely outcome."
Ten Fed officials estimated two cuts next year, three predicted one, three said three cuts, and one saw four cuts.
"In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks,” officials from the Fed's Federal Open Market Committee said in a statement.
The statement added in the phrase "extent and timing," indicating that the Fed may not continue its current trend of consecutive meeting cuts.
The language, Powell said Wednesday, does signal the Fed is "at or near" a point where it could "slow the pace of further adjustments."
Read more: How the Fed rate cut affects your bank accounts, loans, credit cards, and investments
He also acknowledged some uncertainty surrounding the effects the new policies of the Trump administration may have on the Fed’s rate path.
Some economists predict new trade, tariff, and immigration stances could be inflationary, posing new challenges for the central bank.
"We expect significant policy changes," Powell said. "We need to see what they are and what effects they have. We will have a much clearer picture" once that happens.
The Fed, he added, is "thinking about these questions" but won’t have definitive answers for some time yet.