The Federal Reserve lowered interest rates for a third straight meeting but signaled that it could be done cutting for the time being, reflecting a clash between the outlook for jobs and inflation. After voting for another quarter-point cut on Wednesday, the Fed is “well positioned to wait to see how the economy evolves” before adjusting rates again, Chair Jay Powell said during a press conference. The Fed’s updated economic projections, also released on Wednesday, showed that officials anticipate just a 25 basis-point cut to the fed funds rate next year alongside stronger economic growth, cooler inflation, and lower unemployment compared with 2025.

By the time they gather for their next rate decision in late January, officials will have a larger basket of economic data in hand, including jobs and inflation numbers through December, following delays stemming from the government shutdown. The policy-setting committee’s vote, which included three dissents, illustrated that officials are divided over whether job-market angst or sticky inflation should steer their rate moves. On the inflation side of the Fed’s dual mandate, price pressures have not abated as quickly as officials had hoped. Core inflation based on personal consumption expenditures—the inflation measure favored by Fed officials—ticked down to 2.8% year-over-year in September but continues to hover above the central bank’s 2% target.

PGIM’s Daleep Singh, Vice Chair and Chief Global Economist, discusses the implications of the Fed’s economic projections and the potential for a more dovish policy stance after Powell’s term concludes in May.