Markets got what they wanted from Powell with a Fed rate cut and they’re still not happy

Core Points - The Federal Reserve cut interest rates by 0.25%, but the move was framed by Jerome Powell as "risk management" due to labor market weakness, leading to investor unease [1] - The Fed's dot plot suggests a potential 50bps cut at a future meeting, but Powell emphasized a cautious, meeting-by-meeting approach [1][6] - Political pressure and divisions within the Fed were highlighted by dissent from Stephen Miran, who favored a larger cut [1] Economic Context - The Fed's cut was not accompanied by the usual indicators of a healthy economy or a return to the 2% inflation target, raising concerns among analysts [2] - Powell's description of the cut as motivated by apprehension rather than confidence reflects the current economic uncertainty [3] - Labor market conditions are described as less dynamic, with increased downside risks to employment, while inflation remains elevated compared to the Fed's long-term goal [4] Market Reactions - Following the Fed's announcement, markets were left feeling less confident about the easing cycle, with Treasury yields rising and U.S. equities remaining flat [4] - The Fed's dot plot shifted to indicate a possible 50bps cut in one of the final meetings of the year, but Powell's comments on uncertainty dampened expectations [5][6] - J.P. Morgan's Head of Investment Strategy noted the Fed's cautious approach as a prudent response to the current macroeconomic environment [6]