The Federal Reserve cut interest rates for a third time this year

The Federal Reserve lowered interest rates by a quarter of a percentage point on Wednesday, a highly contentious decision that suggests a divided committee may be reluctant to lower borrowing costs much further, unless the labor market weakens sharply.

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, demonstrating how fractured the central bank has become as it balances risks of rising unemployment and sticky inflation.

The cut of a quarter point — a cautious interest rate move by the Fed — could make it cheaper for average Americans who hold a mortgage, have credit card debt or need to take out or refinance a personal loan. It would also help businesses borrow at lower rates.

But it comes at the risk of stoking inflation that has yet to fall to the Fed’s preferred levels. At a news conference following the Fed’s announcement, Powell said that tariffs were helping to keep inflation higher than it might be otherwise.

Given the Fed’s dual mandate of promoting maximum employment while keeping prices stable, any move the central bank makes comes with risks.

“There is no risk free path for policy as we navigate this tension between our employment and inflation goals,” Powell said. “Our obligation is to make sure that a one time increase in the price level does not become an ongoing inflation problem.”

The Fed chair said the committee decided to cut rates because of a number of factors.