The Federal Reserve's decision to lower the federal funds rate by a quarter percentage point on Wednesday resulted in three significant dissenters, marking the most divisive vote within the central bank in over six years.
Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeffrey Schmid voted against a rate reduction. Meanwhile, Federal Reserve Governor Stephen Miran, the newest member, advocated for a more substantial half-point cut. This decision signals Miran's third consecutive dissent, following his call for a half-point rate cut in the previous October and September meetings. Additionally, Schmid had previously opposed any rate decrease in October.
The last occurrence of three dissenting votes during a Fed meeting was in September 2019.
Moreover, there were four ‘soft dissents’ among nonvoting participants of the meeting. These policymakers projected that interest rates should remain at the prior level of 3.75 percent to 4 percent by year-end.
“'Hard dissents' from voting members as well as the 'soft dissents' seen in the dot plot highlight the Fed's hawkish bloc, and the return of 'extent and timing' language to the statement regarding future policy decisions was likely done to appease them,” noted Kay Haigh, global co-head of fixed income and liquidity solutions at Goldman Sachs Asset Management. “While this leaves the door open to future cuts, labor market weakness will have to clear a high bar,” she added.
However, Christopher Rupkey, chief economist at FWDBONDS, suggests that these dissents might not indicate the Fed's moves for the upcoming year. “The dissents ruled against a faster pace of rate cuts today, but the winds of change are in the air,” Rupkey noted. “A new Fed Chair in 2026, and perhaps many more new Fed officials, means more interest rate cuts are coming next year as rate cuts are big on the Trump 2.0 economic agenda even if not listed explicitly, if for nothing else but to weigh against the slowing economy due to the import tariffs uncertainty.”
— CNBC's Jeff Cox contributed reporting.
Correction: The last time there were three dissents during a Fed meeting was in September 2019. An earlier version misstated the month and year.