The Fed cut rates again, but officials disagree on what comes next. What it means for you

Core Viewpoint - Federal Reserve Chair Jerome Powell has dampened expectations for a holiday rate cut, indicating that a December reduction is uncertain due to a cooling labor market and persistent inflation [1][2]. Summary by Sections Federal Reserve's Current Stance - The Federal Reserve has lowered its benchmark federal funds rate to a range of 3.75% to 4% as of October 29, but Powell emphasized that certainty regarding future cuts is lacking [2][5]. - Powell highlighted the ongoing government shutdown as a factor that hampers the Fed's access to crucial economic data, contributing to uncertainty in policy decisions [2][3]. Labor Market and Inflation - Powell noted signs of a cooling labor market and persistent inflation, which currently stands at 3%, above the Fed's target of 2% [6]. - He described the current situation as a "risk management" scenario, where both inflation and labor market conditions present challenges [6]. Committee Dynamics - There are strong disagreements among Federal Reserve voting members regarding the path forward, with some advocating for a cautious approach to assess potential risks to the labor market [4]. - Powell stated that a further reduction in the policy rate at the December meeting is not guaranteed, reflecting the divided views within the committee [4]. Market Reactions - Futures markets, which previously anticipated a rate cut, shifted their expectations following Powell's comments, now predicting that the Fed will maintain current rates [7]. - Some economists have adjusted their expectations for a rate cut at the end of the year, citing a less threatening inflation outlook due to various mitigating factors [8]. Future Projections - Despite a tempered outlook, some economists still expect a December rate cut, with a belief that additional cuts may be necessary next year to support growth [9].