Fed Rate Cut Drama: 3 Dissenters Emerge! 🤯
The latest Fed meeting was anything but unanimous. While most agreed on a 0.25% rate cut, two presidents opposed it entirely, and one governor pushed for a bolder 0.5% reduction. Fed Chair Powell is playing it coy, stating that rates could stay put, dip slightly, or fall more aggressively next year, all depending on incoming data. He's adamant that rate hikes are NOT the baseline.
The labor market and inflation remain under the microscope. Powell hinted that recent job numbers might be inflated by around 60,000 monthly. He believes the US is currently sitting at the higher end of its neutral interest rate.
On AI, Powell remains neutral, acknowledging its potential to both displace jobs and boost productivity and GDP. Tariffs are seen as a minor, one-time inflationary blip, with their full impact likely clearer in early 2026.
The Fed's $40 billion T-bill repurchase program starting December 12th is NOT QE. It's about ensuring banks have enough reserves and managing repo rates. This program will wrap up when reserves are deemed sufficient.
Despite a dot plot suggesting just one rate cut in 2026, don't lock that in. The Fed's outlook can shift dramatically, as seen with the recent surge in December cut probability. Expect more volatility.
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