MICHEL MARTIN, HOST:
We're going to start with the latest from the country's central bankers.
STEVE INSKEEP, HOST:
It's getting a little cheaper to borrow money.
MARTIN: The Federal Reserve voted to cut interest rates by a quarter percentage point, a decision the Fed chairman described as a close call. And there was unusual disagreement among Fed policymakers. Investors were relieved by the move. The Dow Jones Industrial average jumped nearly 500 points.
INSKEEP: NPR's Scott Horsley jumped into action to cover this story. Scott, good morning.
SCOTT HORSLEY, BYLINE: Good morning, Steve.
INSKEEP: What was the dissent?
HORSLEY: Well, there were three dissents from the Fed's vote to cut rates by a quarter point. Two of those dissenters wanted to hold rates steady and a third wanted to cut rates even more. You know, the Fed is kind of in a tough spot here. Cutting rates is designed to help the job market, which has shown signs of weakness in recent months. But inflation is still higher than the central bank would like. Fed Chairman Jerome Powell says all of his colleagues want maximum employment and stable prices, but they have differing views on which is the more urgent challenge right now.
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JEROME POWELL: All across the committee, people see the picture pretty similarly but see the risks quite differently.
HORSLEY: You know, when unemployment soared during the pandemic, it was pretty obvious the Fed wanted really low interest rates. And when inflation soared back in 2022, it was pretty obvious that interest rates needed to be higher. Today, it's more nuanced. And the right course of action is not so obvious. And that's reflected in yesterday's split vote.
INSKEEP: In the end, a solid majority did vote to cut interest rates one more time. Are they going to cut interest rates yet again?
HORSLEY: Well, probably not right away. Fed policymakers offered some updated forecasts of where they think rates are headed, and on average, they only expect to cut rates once more in 2026. Now, those forecasts are just a guess. They're not a roadmap. But Powell says he and his colleagues are going to be pretty cautious about lowering rates anymore.
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POWELL: We haven't made any decision about January. But as I've said, we think we're well-positioned to wait and see how the economy performs.
HORSLEY: We are going to get a whole lot more information about both inflation and unemployment before the next Fed meeting in January. And that's something we have been really starved for in the last couple of months. You know, because the government shutdown, we never got those numbers for October. And the November numbers have been delayed until next week. So the next time Powell and his colleagues gather, we may have a clear picture of which way the economy's headed.
INSKEEP: Scott, I want to ask about the bigger picture here because over the last several years, we've had this problem with inflation. It still hasn't gone away. People are concerned about the cost of living because their purchasing power effectively has gone down 20%, 25% over the last several years. Isn't the Fed concerned that lowering interest rates will bring inflation back up again?
HORSLEY: Yeah. Powell was asked why he and his colleagues seem to be focused on the job market right now when there's so much concern about high prices. Even though inflation has come down a lot, it is still above the Fed's 2% target. And part of that is because the president's tariffs are pushing up the price of imported goods. Now, Fed officials generally don't think tariffs are going to have a long-lasting effect on inflation, but they've been burned before. So Powell says they're not taking any chances.
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POWELL: We hear loud and clear how people are experiencing costs. It's really high costs. And a lot of that is not the current rate of inflation. A lot of that is just embedded higher cost due to higher inflation in 2022 and '23.
HORSLEY: Once prices go up, they rarely come back down. But if you're lucky, rising wages outpace those price hikes. Powell says the best way to help with affordability is not only to get inflation down but also to make sure we have a really strong job market.
INSKEEP: NPR's Scott Horsley. Thanks so much. Transcript provided by NPR, Copyright NPR.
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