🇺🇸 The Fed cuts 25 points and interest rates decrease to 4.0%

Expectations 4.0% - Previously: 4.25%

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📊 Summary of the FOMC meeting on 30/10/2025

🟢 Interest Rates & Policy:

Powell said it is uncertain whether interest rates will be cut in December, depending on upcoming inflation and the economy. He acknowledged the risk of rising inflation and job losses → indicating the risk of stagflation.

🟢 Internal Divisions:

After 5 years of consensus, this time one person opposed the cuts, while another wanted a stronger reduction of 0.5% → the Fed is starting to fracture.

🟢 Economy & Labor:

Powell stated that the labor market has not shown clear signs of weakening, although many companies are cutting jobs and hiring is slowing due to the impact of AI. However, this has not yet reflected in current unemployment data.

🟢 Inflation & Tariffs:

Powell indicated that recent inflation is mainly due to tariffs, and may only be a temporary factor. If not accounted, inflation is close to the Fed's 2% target. He explained that inflation will naturally decrease when the impact of tariffs expires, as the calculation is based on the rate of price increase rather than absolute price levels.

🟢 AI & Bubbles:

In response to concerns that AI could increase layoffs, Powell answered ambiguously and without specific evidence. When asked about the AI bubble, he dismissed it, asserting that companies today have real profits, unlike during the Dot-Com bubble.

🟢 Balance Sheet & QT:

The Fed will stop shrinking the balance sheet after December, reinvesting MBS into Treasury bonds, maintaining an appropriate size relative to GDP.

⚡️ In summary: Powell today again cautiously navigates the prospect of further interest rate cuts while being concerned about stagflation, but still signals positively as QT is nearing its end.