The Federal Reserve cut interest rates for the third time this year on Wednesday, a move that comes amid growing concerns that the job market may be weaker than official numbers suggest.

The quarter-point reduction is expected to bring relief to American families by lowering the cost of mortgages, credit card balances and personal loans, while also making it easier for businesses to invest and expand. The decision underscores ongoing efforts to support economic growth and protect American workers.

However, the Fed acknowledged that inflation remains stubborn, with Chairman Jerome Powell pointing to tariffs as one factor keeping prices elevated. Still, the central bank emphasized that strengthening the labor market remains a top priority.

“The reality is that there is no risk-free path forward,” Powell said, noting the challenge of balancing job growth with price stability. “Our responsibility is to prevent temporary price increases from turning into long-term inflation.”

According to Powell, the decision to cut rates was driven largely by signs of cooling in the labor market. Unemployment has risen modestly since June, and the Fed now believes recent job reports may have overstated employment gains by roughly 60,000 positions.

Powell suggested that payroll growth previously reported as modest gains may actually reflect net job losses, reinforcing the need for economic support measures.

While markets had largely expected the rate cut, divisions within the Federal Reserve remained. Some officials warned that easing rates too quickly could risk higher inflation.

Despite those concerns, financial markets responded positively. Stocks surged following the announcement, with the S&P 500 climbing 0.7% and the Dow Jones Industrial Average jumping more than 500 points.

The Fed also announced plans to purchase billions of dollars in U.S. Treasury bonds each month, a move aimed at strengthening the financial system and ensuring stable credit conditions.

The decision revealed rare internal disagreement, with three Fed officials dissenting. One supported a larger rate cut, while two opposed any cut at all — the most notable split within the committee in years.

Looking ahead, the Fed’s updated projections point to stronger economic growth in 2026, with GDP expected to rise 2.3%. Officials anticipate one additional rate cut next year and another in 2027.

Language in the Fed’s statement suggests that this cut may mark a pause in rate reductions, at least until the next policy meeting at the end of January.