Meta Platforms earnings missed by $5.63, revenue topped estimates
Investing.com--The Federal Reserve cut interest rates by 25 basis points on Wednesday for the second time this year and said it would stop reducing the size of its balance sheet as soon as December. Fed Chair Jerome Powell pushed back against expectations that another rate cut in December was a done deal, citing growing divisions among voting members over the rate outlook.
"Job gains have slowed this year, and the unemployment rate has edged up but remained low through August; more recent indicators are consistent with these developments. Inflation has moved up since earlier in the year and remains somewhat elevated," the Fed said in its monetary policy statement on Wednesday.
The rate-setting Federal Open Market Committee, the FOMC, lowered its benchmark rate to a range of 3.75% to 4%.
At its prior meeting in September, the FOMC’s Summary of Economic Projections showed that voting Fed members expected interest rates to fall to 3.4% in 2026, suggesting one further cut this year.
But at the press conference that followed the rate decision, Fed chair Powell pushed back against dovish bets on a December rate cut.
A rate cut at the December meeting is not a "foregone conclusion," Powell said, adding that the Fed is "far from it." The Fed chief pointed to the different views among Fed members that muddies the path for consensus on rate cuts.
The division between Fed members favoring deeper rate cuts and those who prefer to wait and see amid uncertainty about the neutral rate—the level that would neither boost nor restrain economic growth—were apparent at the meeting as two voting Fed members dissented against the decision. Fed Governor Stephen Miran continued to call for a half-percentage-point interest rate cut, while Kansas City Fed President Jeffrey R. Schmid preferred no change to rates at this meeting.
Still, some on Wall Street point to dovish tilt from the statement that suggest a rate cut for December remains on the table.
The Fed statement while still keeping the easing bias...did not emphasize "recent strength in GDP growth as much as they might have," Morgan Stanley said in a Wednesday note. "Both of these tilt dovish and, we think, consistent with our forecast for another 25bp cut in December," it added.
The Fed also teed up the prospect of ending its quantitative tightening program as soon as Dec. 1. "Beginning on Dec. 1, roll over at auction all principal payments from the Federal Reserve’s holdings of Treasury securities," the Fed said Wednesday.
Since 2022, the Fed has been reducing the amount of assets held on its balance sheet by allowing maturing assets to roll off its balance sheet. QT has cut the Fed’s balance sheet shrink from nearly $9 trillion at the height of pandemic to the current figure of about $6.59 trillion.
The rate-cut decision comes even as the government shutdown has halted or delayed key economic readings on jobs and inflation. The most recent inflation report, which was delayed before its release, showed that U.S. consumer prices increased slightly less in September than economists had expected.