AFP, Washington

A divided US Federal Reserve lowered interest rates Wednesday for a third consecutive time this year, but signaled that it could hold off further reductions in the coming months.

Fed Chair Jerome Powell said the central bank is “well positioned to wait and see how the economy evolves from here.”

The Fed’s statement on its decision also brought back language used in late-2024 to signal a pause in more rate cuts.

Powell stressed that officials are in a good position to determine the “extent and timing of additional adjustments based on the incoming data, the evolving outlook and the balance of risks.”

Wednesday’s reduction by a quarter percentage point brings rates to a range between 3.50 percent and 3.75 percent, the lowest in around three years, a move aligned with market expectations.

The Fed penciled in one more rate cut next year, and flagged heightened risks to employment as it announced its latest decision.

But a rift within the central bank deepened with three officials voting against the modest reduction.

Chicago Fed president Austan Goolsbee joined Kansas City Fed president Jeffrey Schmid to support keeping rates unchanged. Fed Governor Stephen Miran again backed a bigger, half-percentage-point cut.

The Fed’s rate-setting committee has 12 voting members -- including seven members of the board of governors, the New York Fed president and a rotation of reserve bank presidents -- who take a majority vote in deciding on rates.

Powell noted that some disagreement was expected, pointing to tensions between inflation risks and a weakening jobs market: “It’s a close call.”

“Inflation is well above the Fed’s target, but the job market appears to be softening,” said Mortgage Bankers Association chief economist Mike Fratantoni in a statement.

“Thus, there is ammunition for both sides of the debate” within the Fed, he added. For now, Powell said, the Fed is “in the high end of the range of neutral” rates, with neutral being a level that neither stimulates nor restricts economic activity.

The Fed has previously described interest rates as “modestly restrictive” -- “neutral” could suggest less justification to lower levels quickly.

“We expect the Fed will want to pause for a while to allow time to for this and prior cuts to feed through the economy,” said economist Ryan Sweet of Oxford Economics.

Powell added that the US economy needs several years where wages are higher than inflation for “people to start feeling good about affordability.”

On Wednesday, Fed officials also lifted their 2026 growth forecast, while easing inflation expectations and keeping their unemployment rate projection unchanged.

These forecasts could shift as the central bank grapples with a delay in federal economic data releases after a record-long government shutdown.