Here’s how Wall Street is reacting to the Fed’s latest interest rate announcement

Investing.com - The Federal Reserve lowered interest rates by 25 basis points to a range of 3.75% to 4% as expected on Wednesday, although the outlook for the trajectory of borrowing costs in the near-term remains mired in a fog due to a dearth of new economic data during an ongoing federal government shutdown.

Policymakers showed division in their October decision. Fed Governor Stephen Miran -- an appointee of President Trump, who has long badgered the central bank to quickly and deeply cut rates -- called for a bigger 50-basis point reduction, while Kansas City Fed President Jeffery Schmid unexpectedly voted to leave borrowing costs unchanged.

Speaking in a post-earnings press conference, Fed Chair Jerome Powell flagged that another similarly-sized rate drawdown was "far from" a foregone conclusion at the central bank’s next gathering in December. Following the comment, traders brought down their bets on a rate cut at the meeting to a probability of 71%, down from 90% earlier.

Powell also announced the end of the Fed’s drive to diminish its holdings of Treasuries and mortgage-backed securities, a process known as quantitiative tightening, because of recent signs of stress in overnight lending markets.

Here’s a look at how analysts on Wall Street are reacting to the news:

"[A]nother rate cut in December is a good base case, but Chair Powell made a point to not only not pre-commit, but note the data could alter the direction of policy. Options could be stop cutting here, or maybe skip a meeting and assess." - UBS

"The FOMC was hawkish — Powell’s comment at the start of the presser that ’a December rate cut is far from a foregone conclusion’ was the most important thing he said this afternoon. He characterized the labor market as fairly steady despite slowing, and inflation as somewhat elevated, albeit largely driven by tariffs. Our read is that if conditions are the same as they are today at the December FOMC, the Fed would likely favor waiting." - Wolfe Research

"When it comes to the shutdown, Powell feels the Fed is getting an adequate amount of data and information to gauge the economy broadly, although if the government stoppage continues and the economic figure blackout persists, he implied this could mean doing nothing with policy at the Dec meeting out of an abundance of caution." - Vital Knowledge

"The FX market took [Wednesday]’s FOMC as a near-term USD-bullish, mainly due to Powell’s deliberate comment at the onset that a cut in December was not a foregone conclusion. This was taken as a hawkish signal." - BofA Securities

"Chair Powell pushed back against market pricing of a December cut. Future rate cuts will be more data dependent, but the key question is what data the Fed will have before December. A prolonged shutdown is a risk to our view of more consecutive cuts." - Morgan Stanley

"The Fed had already slowed the pace of its balance sheet run-off back in April, so this is a minor change since it was only shrinking by approximately $20 billion per month anyway. The next step, however, will be to begin expanding the balance sheet by roughly $20 billion per month, to allow the monetary base (reserves plus currency) to increase in line with nominal GDP." - Capital Economics