Washington: The U.S. Federal Reserve has once again lowered its benchmark interest rate by a quarter percentage point, making this the third consecutive reduction. This decision, revealed on Wednesday, comes as policymakers face a divided stance due to a weakening labor market and persistent inflation. The central bank also indicated the possibility of an additional rate cut next year.

According to Yonhap News Agency, following a two-day meeting of the Federal Open Market Committee (FOMC), the key interest rate has been adjusted to the 3.5-3.75 percent range. This marks the third reduction since September, creating a gap of up to 1.25 percentage points between the key rates of South Korea and the United States. The Fed's press release highlighted a slowdown in job gains this year and an increase in the unemployment rate through September, with recent indicators supporting these observations. Inflation, meanwhile, has risen since earlier in the year and remains above desirable levels.

The FOMC members' latest median economic projection suggests that the federal funds rate could be cut to 3.4 percent by the end of next year, remaining consistent with the September forecast. This projection suggests the potential for one more quarter-percentage point reduction in 2026. Economic growth projections have also been adjusted, with the U.S. gross domestic product expected to grow by 1.7 percent this year and 2.3 percent next year, both up from previous forecasts.

Personal Consumption Expenditures (PCE) inflation, a measure of household consumer spending on goods and services in the U.S., is expected to reach 2.9 percent by the end of the year and 2.4 percent by the end of next year. These projections are slight reductions from earlier estimates.

The Fed's decision was met with differing opinions among policymakers. Some opposed the rate cut due to inflation remaining significantly above the central bank's 2 percent target, while others supported it to address the weakening labor market. The decision-making process was further complicated by delays in economic data releases triggered by the government shutdown. Notably, Stephen Miran advocated for a more substantial half percentage point reduction, while Austan Goolsbee and Jeffrey Schmid preferred to maintain the current rate. Ultimately, Fed Chair Jerome Powell and others voted in favor of the latest monetary adjustment.