Fed Delivers a 25 Basis Point Cut but Signals a Higher Bar for Any Additional Easing Next Year

Group 1 - The Federal Reserve cut the federal funds rate by 0.25%, bringing it to a target range of 3.5%-3.75%, marking the third rate cut of 2025 following three cuts in 2024 as inflation eased [1][8] - The Federal Open Markets Committee (FOMC) is currently divided, with three voting members dissenting on the rate cut decision, indicating a rare level of disagreement among the committee [2][3] - Future rate cuts may be challenging, as the FOMC's new statement suggests that any additional cuts will be data-dependent, and the median expectation is for only one rate cut in 2026 and another in 2027 [4][5] Group 2 - The stock market is rallying due to the Fed's less hawkish tone in its statement and Chair Jerome Powell's press conference, which alleviated investor fears [6] - Investors appear skeptical of the Fed's prediction of just one rate cut in 2026, with the CME FedWatch tool indicating a median expectation for two rate cuts and a 69% chance of at least two cuts next year [7][8] - Recent significant weakening in economic data and the upcoming change in Fed leadership may also influence market expectations and sentiment [9]