🇺🇸 UPDATE: Fed Chair Powell says monetary policy is not on a preset course, with decisions to be made meeting by meeting https://t.co/Kg0JJWtrdg ...

Core Viewpoint - The Federal Open Market Committee has decided to lower the policy interest rate by a quarter percentage point to support employment and inflation goals, while also initiating purchases of shorter-term Treasury securities to maintain an ample supply of reserves [2] Economic Activity - Economic activity is expanding at a moderate pace, with solid consumer spending and continued growth in business fixed investment [3] - The housing sector remains weak, and the temporary federal government shutdown has negatively impacted economic activity, though growth is expected to rebound next quarter [4] Labor Market - Despite delays in official employment data, evidence indicates low levels of layoffs and hiring, with perceptions of job availability declining [5] - The unemployment rate has edged up to 4.4%, with job gains slowing significantly, attributed to a decline in labor force growth due to lower immigration and participation [5][6] - The median projection for the unemployment rate is 4.5% at the end of this year, with a slight decrease expected thereafter [6] Inflation - Inflation has eased from mid-2022 highs but remains elevated, with total PCE prices rising 2.8% over the 12 months ending in September [7] - Core PCE prices also rose 2.8%, with inflation for goods increasing due to tariffs, while disinflation in services continues [8] - The median projection for total PCE inflation is 2.9% this year and 2.4% next year, with a long-term goal of 2% [9]

Today, the Federal Open Market Committee decided to lower our policy interest rate by a quarter percentage point. As a separate matter, we also decided to initiate purchases of shorterterm Treasury securities solely for the purpose of maintaining an ample supply of reserves over time, thus supporting effective control of our policy. ...

Core Insights - Official interest rates are declining, but consumer-relevant rates are not following suit, indicating a disconnect in the market [1] Group 1: Treasury Yields and Interest Rates - The 10-year Treasury yield rose to 4.21%, its highest level since early September, despite expectations of a Federal Reserve interest rate cut [2][10] - The probability of a quarter-percentage-point cut by the Fed increased by 7 percentage points in the past two weeks, yet the 10-year yield has risen by about 20 basis points [3] Group 2: Economic Impact - Elevated interest rates have negatively impacted economic growth, particularly in sensitive sectors like housing [4] - The Fed's rate-setting does not directly influence consumer rates; instead, it sets a floor for bank reserve rates, leading to potential market disconnects [5] Group 3: Market Concerns - Concerns over the U.S. national debt, exacerbated by tax cuts expected to add over $3 trillion to the debt over the next decade, may be driving yields higher as investors seek more compensation [6] - Policy uncertainty and geopolitical risks are affecting international demand for U.S. Treasurys, although foreign appetite remains relatively healthy [7] Group 4: Inflation and Monetary Policy - Rising yields may reflect uncertainty regarding inflation trends and the Fed's monetary policy response, influenced by tariff policies [8][10] - President Trump's influence on the Fed's independence raises concerns about the alignment of U.S. policy with economic realities, potentially adding to inflation and interest rate uncertainty [9]

Monetary Policy & Interest Rates - A rate cut is expected, but there may be dissent from some members [1] - The market anticipates a rate cut, but the speaker expects a hawkish press conference signaling a higher bar for future cuts [2] - The speaker believes the Federal Reserve has an inflation problem at 3% compared to the 2% target, while the labor market is in balance [3] - The speaker acknowledges arguments for a softening labor market based on unemployment rate and quits rate [6] Labor Market Analysis - The current labor market is considered healthy with unemployment well below 5% [3] - There's a debate about whether the bigger problem is inflation or the labor market, with concerns about potential disruptions in the labor market [4][5] - The speaker notes a market with less churn, fewer separations, and less hiring [7] Future Uncertainty - Predicting the next year is exceptionally hard due to uncertainty around monetary policy and the transition in the chairmanship of the Federal Reserve [8] - There's uncertainty about how the expected new chairman will approach monetary policy [9]

Group 1 - The expectation of a rate cut is present, with potential dissent from both dovish and hawkish members of the Federal Reserve [1][2] - The labor market is currently balanced, with unemployment below 5%, but inflation remains elevated at 3%, indicating an inflation problem rather than an employment issue [3][4] - There are mixed signals regarding the labor market, with some indicators suggesting softening, such as a decrease in the quits rate to 1.8% and other reports indicating less hiring and separations [6][7] Group 2 - The uncertainty surrounding U.S. monetary policy for the next year is significant, particularly with the upcoming transition in the chairmanship of the Federal Reserve [8] - Even with expectations that Kevin Hasset may take the role, there remains uncertainty about his approach to monetary policy [9]

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The Fed chair sweep stakes apparently not a done deal just yet. Becky, the president confirming last night in Air Force One that he and Treasury Secretary Scott Bessant will begin a series of interviews today with candidates to replace Fed Chair Jay Powell. >> We're going to be looking at a couple of different people, but I have a a pretty good idea who I want.>> The interviews will begin with former Fed Governor Kevin Walsh, according to two sources. They come despite comments from the president last week ...

Core Viewpoint - Kevin Hassett, the National Economic Council director and a frontrunner for the Federal Reserve chair, is advocating for a significant overhaul of the Federal Reserve, emphasizing a return to a nonpartisan focus on monetary policy and bank regulation, while distancing the institution from political influences [1][2][4]. Group 1: Proposed Changes to the Federal Reserve - Hassett suggests that the Federal Reserve should concentrate on monetary policy and avoid political discussions, criticizing recent Fed officials for their comments on tariffs and inflation [2][6]. - He plans to evaluate the effectiveness of the Fed's economists and research divisions, proposing potential cuts or replacements if necessary [6][7]. - Hassett believes that the Fed's current leadership has made policy errors and advocates for a more independent, data-driven approach to monetary policy [4][6]. Group 2: Economic Context and Implications - As the Federal Reserve prepares for its next rate decision, Hassett indicates that there is significant room for rate cuts due to an increase in aggregate supply, which he attributes to advancements in AI and new factory investments totaling $18 trillion [5][6]. - He argues that inflation occurs when aggregate demand exceeds aggregate supply, and the current economic conditions are conducive to downward pressure on prices [6][7].

US equities slid Wednesday as traders brace for a widely anticipated quarter-point rate cut later in the session, along with projections from officials on the trajectory of monetary policy https://t.co/v02X0wAx86 ...