The Federal Reserve lowered interest rates by a quarter of a percentage point on Wednesday in a highly contentious decision. The split among policymakers suggested that the central bank may be done lowering borrowing costs for the time being unless there are clear signs that the labor market is weakening further.

The decision to cut for a third meeting in a row shifted interest rates to a new range of 3.5 percent to 3.75 percent. It marked the fourth straight vote that was not backed by all members of the 12-person Federal Open Market Committee, underscoring how fractured the central bank has become as it grapples with the risk of both rising unemployment and sticky inflation.

Stephen I. Miran, a member of the Board of Governors, opposed the decision in favor of a larger, half-point reduction. It is the third meeting in a row that Mr. Miran, who was tapped by President Trump to join the Fed in September and is on a temporary leave of absence from the White House, has dissented.

Jeffrey R. Schmid, president of the Federal Reserve Bank of Kansas City, voted for the Fed to stand pat, as he did in October. He was joined this time by Austan D. Goolsbee, president of the Chicago Fed.

That degree of division is rare for Jerome H. Powell, the Fed chair, who has previously been able to corral his colleagues to move as a largely cohesive group even while navigating tricky economic terrain. The split inside the Fed has only dialed up the pressure on Mr. Powell, who is simultaneously facing attacks from Mr. Trump and contenders seeking to replace him when his term as chair ends in May.

At a news conference after the decision, Mr. Powell said that divisions were only natural given the complicated environment the central bank is navigating. He said he could have made the case either way for the Fed to cut interest rates or pause reductions, describing it as a “close call.”

“You’ve got one tool,” he said. “You can’t do two things at once.”

Fed Officials’ Expectations for Rates

A chart showing the Federal funds target rate having decreased to TK percent from 5.375 percent and what 19 Fed officials think that rate should be at the end of this year and next, which range from about three to five percent.

Actual

target rate

Latest

projections

6

%

5

4

3.5 -

3.75%

3

Each dot represents what one Fed official thinks the midpoint of the target rate range should be at the end of next year.

2

1

’21

’22

’23

’24

’25

’26

6

%

Actual target rate

Latest projections

5

4

3.5 - 3.75%

3

Each dot represents what one Fed official thinks the midpoint of the target rate range should be at the end of next year.

2

1

’21

’22

’23

’24

’25

’26

New projections released on Wednesday also highlighted the extent of the disagreement plaguing the Fed, which is composed of 12 regional presidents and seven members of the Board of Governors. The “dot plot,” a chart that aggregates what all 19 officials forecast will happen to borrowing costs over the coming years, showed that four other policymakers registered so-called soft dissents. They submitted a forecast for interest rates to have ended the year at the previous level of 3.75 percent to 4 percent, indicating their unofficial opposition to a cut.

By the end of 2026, most officials projected just one more quarter-point cut, in line with their forecasts the last time the dot plot was released three months ago. But officials were once again very divided. Seven of the 19 policymakers penciled in no reductions at all next year, while eight wanted at least two reductions. One official, likely to be Mr. Miran given his three dissents in favor of bigger cuts, penciled in interest rates falling closer to 2 percent over the course of next year.

In a further sign that the Fed is trying to keep open its options around interest rate decisions next year, the central bank amended its policy statement to say that it would assess the incoming economic data, evolving outlook and the balance of risks “in considering the extent and timing of additional adjustments.”

Mr. Powell on Wednesday made clear that no decision had been made about the central bank’s next vote at the end of January. He said that after three quarter-point reductions, interest rates were in the range of “neutral,” a level that the Fed has been seeking because it neither speeds up growth nor slows it down.

That meant the Fed was “well positioned to wait to see how the economy evolves,” he said. Mr. Powell also dismissed any suggested that the Fed may raise interest rates next year, saying that no policymaker supported that.

Shortly after Mr. Powell concluded his news conference, Mr. Trump expressed dismay that the Fed did not announce a deeper cut to interest rates on Wednesday, saying the central bank only reduced borrowing costs by a “rather small number that could have been doubled, at least doubled.”

“You can have tremendous growth without inflation,” Mr. Trump later said. “Everything goes up with the growth. But that’s not inflation. So I think we can do much better than traditional numbers.”

He later added that he was looking for a new chair who “will be honest with interest rates.”

“Our rates should be the lowest rates in the world,” Mr. Trump said.

Recent Fed Dissents Over Rates

Fed governors

Regional bank presidents

The root of the disagreement inside the Fed stems from differing perspectives on whether to be more concerned about the prospects of inflation getting stuck above the central bank’s 2 percent target or the possibility that the labor market is on the cusp of cracking. What has made those judgment calls especially difficult is that officials have lacked access to crucial government data releases because of the shutdown that ended last month.

September’s jobs report was released only weeks ago and showed stronger monthly jobs growth but the unemployment rate rising to a four-year peak of 4.4 percent. That has occurred as price pressures have picked back up again, although the overall increase in inflation because of Mr. Trump’s tariffs has been less intense than first feared.

More clarity about the state of the economy may have helped to break the impasse between officials, but policymakers have had to make do without. The Bureau of Labor Statistics will release November’s jobs report next week as well as the Consumer Price Index report for the month.

Mr. Powell on Wednesday warned that even when the flow of official data fully resumes, it should be looked at with a “skeptical eye.” The government shutdown disrupted data collection, which could make the initial reports confusing for what Mr. Powell called “very technical reasons.”

According to the Fed’s new projections, most officials turned upbeat about the economic outlook, raising their forecasts for growth in 2026 to 2.3 percent from 1.8 percent three months ago.

A majority still expected the unemployment rate to settle at 4.4 percent next year before declining. They also expect inflation to stay stuck above the 2 percent target for several more years, even though they penciled in a slightly lower peak than just three months ago for both overall inflation and “core” inflation, which tracks underlying price pressures.

Mr. Powell made clear that one of the reasons the Fed was missing its target was Mr. Trump’s tariffs. “We have made progress this year in non-tariff-related inflation,” he said, noting that the peak impact of the president’s levies would likely come in the first quarter of the year.

Mr. Powell was also repeatedly asked about the impact of A.I. on the economic outlook, which he cited as something that would help to shore up growth.

“Fiscal policy is going to be supportive, A.I. spending will continue, so it looks like the base line would be solid growth next year,” he said, although he added in a separate exchange that this growth could occur without significantly more jobs created.

Through the end of 2028, officials expect interest rates to remain just above 3 percent. They maintained that over a longer time horizon, the so-called neutral rate had steadied at 3 percent.

The Fed also announced on Wednesday that it would begin to buy Treasury bills as part of an effort to ensure that there is enough cash in the banking system so that short-term borrowing costs do not inadvertently spike. The decision comes just weeks after the central bank stopped shrinking the size of its balance sheet, a process known as quantitative tightening.