The Federal Reserve sliced interest rates by a tidy quarter-point Wednesday, only for Chair Jerome Powell to body-slam market hopes for a December encore, leaving Wall Street wondering if holiday cheer comes with a side of economic jitters.
The Federal Open Market Committee stuck to its script, trimming the federal funds rate to 4.75-5% as anticipated.
But the real drama unfolded backstage, with two lone wolves howling dissent.
Governor Stephen Miran, ever the bold bidder, voted no—craving a half-point haircut instead, as if a quarter weren’t snippy enough for the economy’s wild mane.
Meanwhile, Kansas City Fed President Jeffrey Schmid played the hawk, demanding no cut at all, channeling a flock of inflation worriers convinced the Fed’s easing is like feeding pigeons in the park: fun until the skies darken with feathers.
Powell, microphone in hand at his news conference, didn’t mince words—or did he sharpen them to butter-knife sharpness?
He declared a December cut “not a foregone conclusion,” far from it, as if the committee’s 19 voices weren’t already harmonizing a cacophony of “hold that thought.”
Markets had priced in a 90% shot at another trim, but Powell’s pushback echoed like a referee’s whistle in overtime.
“Strongly differing views,” he noted, promising the meeting minutes—due in three weeks—would spill the tea on this verbal cage match.
And spill they might, turning what could be dry reading into a bestseller for insomniac economists.
Shifting gears to the Fed’s balance sheet ballet, the end of quantitative tightening arrived right on cue—or at least, on the committee’s cue.
No more letting that $6.6 trillion asset pile roll off like forgotten gym socks after November’s operations.
Instead, maturing mortgage notes will boogie into short-term Treasury bills, tilting the sheet toward safer, snappier durations.
Powell likened it to a wardrobe refresh: less risky threads, more reliable staples.
It’s like the Fed finally Marie Kondo-ing its portfolio—does it spark economic joy? Absolutely, or at least, that’s the pitch.
Inflation, that stubborn guest who overstays its welcome, hovered around 2.8% by the Fed’s preferred gauge, inching toward the 2% sweet spot but not without a nudge from tariffs.
Those levies, Powell shrugged, add a half-point zing, but it’s temporary—like that extra spice in grandma’s chili that promises fireworks but fades by dessert.
The October forecast? A bit foggy, thanks to the government shutdown halting the Commerce Department’s personal consumption expenditures data drop.
No official numbers means everyone’s playing economic charades, guessing at shadows.
Powell waved off the data drought with Fed aplomb, insisting private and public scraps still paint a portrait of cooling growth, creeping unemployment, and inflation that’s elevated but not staging a full rebellion.
“Outlook unchanged since September,” he assured, as if the shutdown were just a pesky commercial break in the growth show.
Yet uncertainty lingers like that one sock in the dryer, with economists peering through alternative data lenses for clues.
Wall Street’s reaction? A collective eyebrow arch, as stocks dipped then rallied, traders muttering about Powell’s WWE-worthy slam on December dreams.
Dan North of Allianz nailed it: “He kind of did a WWE slam on those expectations… Nope, better not think about it that way.”
The door’s ajar, not slammed, but Powell’s vociferous veto has markets recalibrating their crystal balls.
Rick Rieder at BlackRock, eyeing Powell’s chair come May, sees a skip-ahead scenario: December pause, easing deferred, perhaps under new management.
” Increased chance… potentially to a new Chair,” he mused, as if Fed leadership were musical chairs with interest rates as the tune.
Heather Long of Navy Federal Credit Union played the diplomat: a cut still seems likely, lest any helmsman steer into recession waters.
“No Fed leader wants to be responsible for a slowdown,” she quipped, because who’d volunteer to captain the SS Stagflation?
As the dust settles—or rather, the rates hover—the Fed’s intrigue leaves investors in a delicious dither.
Will December deliver the sequel, or will hawks and doves stage an avian standoff?
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