Topline
The Federal Reserve voted Wednesday to cut interest rates for a second straight month, but the broader market reacted negatively after Fed Chairman Jerome Powell suggested an additional cut may not happen later this year.
Some policymakers have expressed caution about cutting rates further, while President Donald Trump and his recently appointed nominee have pushed for sharp cuts.
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Key facts
The Federal Open Market Committee voted 10-2 in favor of cutting rates by a quarter point to between 3.75% and 4%, down from the 4% to 4.25% range that policymakers chose at the FOMC meeting last month.
Kansas City Fed President Jeffrey Schmid and Fed Governor Stephen Miran were the only dissenting votes: Miran again pushed for a half-point cut after the dissent in the September vote, while Schmid favored the Fed not cutting rates at all.
In its statement, the FOMC updated its assessment of the labor market, noting that “job growth has slowed and the unemployment rate has risen, but remained low in August.”
The Fed appeared to acknowledge the ongoing federal government shutdown, adding that “available indicators” suggest the U.S. economy has grown at a moderate pace and that inflation “has increased since earlier this year and remains somewhat elevated.”
What did Jerome Powell say about interest rates?
Fed Chairman Jerome Powell said in a statement that policymakers at the FOMC’s last meeting in December had “strongly different views” on how to move forward. A further cut in interest rates is “not a foregone conclusion,” Powell said, “far from it.” Powell noted that while some government data has been delayed, public and private sector data that has remained available suggests that employment and inflation “have not changed much” since the FOMC meeting last month.
Stocks fall after Powell abandons hopes for rate cuts
The Dow Jones Industrial Average (0.2%) and the S&P 500 (0.3%) fell on the day after Powell’s statements, reversing earlier gains on the day, largely due to Nvidia’s record rise, which has held up the tech-heavy Nasdaq (0.1%) so far. Boeing (4.3%) recorded a decline in the entire Dow Jones index, followed by Nike (3.1%), UnitedHealth Group (3%) and Home Depot (2%).
Will the Fed cut rates again?
Investors are in favor of an additional quarter-point cut in rates at the FOMC’s last meeting in December, potentially lowering rates to between 3.5% and 3.75%, according to CME’s FedWatch. tool. At last month’s meeting, Fed officials appeared divided on whether to cut rates for a third time this year. However, it is unclear when the Fed will gain insight into the health of the US economy as an ongoing federal government shutdown has delayed reports on inflation and unemployment. In one speech At the Council on Foreign Relations earlier this month, Fed Governor Christopher Waller said he supported the FOMC’s decision to ease monetary policy, signaling his focus had shifted to a “softening” labor market rather than inflation. Waller said that because policymakers “don’t know which way the data on this conflict will go,” the FOMC should “proceed with caution” in adjusting interest rates. Waller noted that he has spoken to “business contacts” to shape his views on the economy as the data blackout continues. Reports released by several companies and economists in recent weeks show that the labor market has continued to deteriorate, suggesting the FOMC may have data supporting additional cuts.
What to pay attention to
Whether Trump will make his choice to succeed Powell, whose term ends in May 2026, by the end of the year. Treasury Secretary Scott Bessent said Monday that five candidates are being considered for the role, including Fed Governors Waller, Michelle Bowman, former Fed Governor Kevin Warsh, National Economic Council Director Kevin Hassett and BlackRock Director Rick Rieder. Bessent said he would present a list of candidates to Trump shortly after Thanksgiving.
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