The Federal Reserve reduces its key interest rate by a quarter of a percentage point and predicts one rate cut in 2026.

The Federal Reserve lowered the main interest rate by a quarter point to between 3.5% and 3.75% amid concerns over a weakening job market, despite inflation remaining above the 2% target. Fed officials project only one further reduction in 2026, with inflation expected to hit 2.5% and unemployment at 4.4%. The decision faced dissent, with some members advocating for no change or a larger cut. Policymakers aim to balance the need to control inflation with the risk of increasing unemployment, indicating a cautious approach as economic conditions evolve.