The Federal Reserve cut its key interest rate Wednesday by a quarter percentage point, signaling a tough road ahead for further reductions. The move featured “no” votes from three members, including hawkish and dovish dissents. The post-meeting statement mirrored language from a year ago, hinting at future policy directions.

Amid a third consecutive rate cut, the focus shifts to the FOMC’s next steps with minimal room for more reductions. The “dot plot” projections show only one cut in 2026 and 2027 before rates stabilize around 3%. Inflation remains above the 2% target, while GDP projections for 2026 were raised to 2.3%.

In addition to the rate decision, the Fed announced it will resume buying Treasury securities to address pressures in overnight funding markets. Chair Jerome Powell, nearing the end of his second term, faces the challenge of maintaining consensus among policymakers as President Trump seeks a nominee favoring lower rates.

Predictions point to National Economic Council Chair Kevin Hassett as the likely nominee for Fed chair, raising concerns about the central bank’s independence. Fed officials continue to navigate challenges, including delayed data from the recent government shutdown and signs of potential layoffs in the labor market.

Read more at CNBC: Fed interest rate decision December 2025: