🚨 The Cautious Cut: Fed Delivers 25 BPS But Closes the Door on December 🚪
The Federal Open Market Committee (FOMC) concluded its latest meeting by delivering the widely anticipated 25 basis point (bps) interest rate cut, moving the target range to 3.75%-4.00%. While the move aims to mitigate rising downside risks to employment amidst slowed job gains, the message from Chairman Jerome Powell was distinctly cautious, immediately tempering market enthusiasm.
The key pivot point was Powell’s press conference, where he firmly stated that a further rate reduction in December is “not a foregone conclusion—far from it.” This rhetoric aggressively pushed back against market pricing that had anticipated a high probability of a follow-up cut, causing the USD to strengthen and Treasury yields to climb.
Adding to the complexity, the Fed announced it will conclude its balance sheet runoff, or Quantitative Tightening (QT), on December 1st. This marks a subtle, additional easing measure aimed at stabilizing liquidity.
Crucially, the policy decision featured a rare, two-sided dissent, underscoring deep internal divisions over the current policy path—one member favored a larger cut, another preferred no change. This internal split, combined with the lack of complete official government data, suggests future policy will be more contentious and highly dependent on incoming economic reports. The Fed is navigating a narrow, data-dependent path with minimal room for error.