The Federal Reserve cut interest rates for the third time in a row this year on Wednesday as inflation remains elevated, and the nation’s labor market softens.  

The move was expected, but came amid increasing dissention among Fed officials, who voted for the cut nine to three — the sharpest divide among the 12-member Federal Open Market Committee since 2019. A majority of Fed members expect at least one more cut in 2026. 

The unusual level of disagreement among Fed members comes as the body seeks to pursue its dual mandate of maximum employment and 2% inflation. It’s doing so without much of the key government economic data it uses to assess the nation’s economy thanks to the recent shutdown, which put a pause on data collection. 

“Job gains have slowed this year, and the unemployment rate has edged up through September,” the FOMC said in a statement. “More recent indicators are consistent with these developments. Inflation has moved up since earlier in the year and remains somewhat elevated.”  

The cut to the federal funds rate from 3.75% to 3.5% does not directly impact mortgage rates but influences them indirectly, so home shoppers should not expect immediate relief.  For the week ended Dec. 5, the average contract interest rate for a 30-year, fixed-rate mortgage ticked up to 6.33% from 6.32% the week before, the Mortgage Bankers Association said in its Weekly Mortgage Applications Survey, which found mortgage applications rose 4.8% week over week. 

“The Federal Reserve is making decisions with limited market data available. However, much data still points to a softening labor market and inflation that remains persistent, keeping prices high heading into the holiday season,” Cotality Chief Economist Selma Hepp said. “However, today’s move will do little to improve home affordability as prices remain strong and mortgage rates are unlikely to slip under the 6% mark for a 30-year mortgage, which will keep cautious first-time homebuyers on the sidelines and overall home-buying activity seasonally slow until we come closer to the spring home buying season.”