🚨Jerome Powell and the Fed just cut rates by 0.25% down to between 4%-4.25%. Here's a high level summary 👇
➡️ RATES: The Fed cuts key overnight interest rate by 25bps to 4.00-4.25% range Fed projections show additional 50bps of cuts by year end, another 25 bps of cuts in each of the next two years. Fed says it is attentive to both sides of dual mandate ➡️VOTE SPLIT: New governor Miran dissented on policy decision, favoring 50bps cut. So only 1 dissent is positive. The Fed is remaining unified under Powell 😊 POWELL: "There wasn't widespread support at all for a 50 bps cut today." ➡️LABOUR MARKET: Says downside risks to employment have risen Job gains have slowed, unemployment has edged up but remains low ➡️INFLATION: Inflation has moved up and remains 'somewhat elevated' ➡️ECONOMY: Economic growth moderated over first half of this year ➡️ BALANCE SHEET: Fed maintains current pace of balance sheet drawdown ➡️SUMMARY ECONOMIC PROJECTIONS: GDP forecasts raised for 2025, 2026 and 2027 Unemployment rate forecast for 2025 unchanged, lowered for 2026 and 2027 PCE forecast for 2025 unchanged, raised for 2026, unchanged for 2027 Core PCE forecast for 2025 unchanged, raised for 2026 and unchanged for 2027 ➡️DOTS: The dots for 2025 were massively shifted lower with one member calling for 5 cuts in 2025. 7 of the 19 members see no more rate-cuts this year... 9 of 19 see 2 more cuts 2 of 19 see 1 more cuts 6 of 19 see no more cuts 1 sees 1 rate hike 1 sees 5 cuts (this is Stephen Miran) ⚠️Fed Funds rate forecast cut for 2025 from 3.9% to 3.6% or another 2 rate cuts. ⚠️The central bank gave a more hawkish outlook for rates in 2026, where officials are predicting only one more rate cut in the new year, slower than the current market pricing of two-to-three. The median forecast for 2026 pencils in just one more rate cut, after the two further moves this year. ⚠️ And then another cut in 2027 to 3.1% That would mean 125 basis points of cutting from September 2025 until the end of 2027. This way short of the 300 basis points Trump has wanted for, like, now. 📌 In a nutshell: The Fed is cutting rates, and projecting more rate cuts, at the same time as upgrading its growth forecast and nudging up its inflation outlook too... And now the HAWKISH 🤢 side of today's decision and ensuing press conference >>> Powell just said during his press conference after the decision he sees the move as a “risk-management cut.” Powell’s comments suggest this move was more of an insurance cut in case the economy dramatically slowed. Source: zerohedge, CNBC
11 of 12 members voted in agreement with this decision.
One fed official (Stephan Miran) penciled in 150 bps of rate cuts for 2025.
"THE MOST IMPORTANT FOMC OF OUR LIFETIME"
$SPY S&P500 is completely flat
Despite some hawkish comments during the Press conference (the "risk management cut"), the Fed now seems more worried about the job market than inflation.
Next job data will be key. Source: zerohedge
As highlighted by Jim Bianco, isn't the "Fed consensus" just an illusion?
See the labels in the dot plot below: one member of the FOMC thinks the Fed is going to HIKE rates this year. One (Stephen Miran) thinks it is going to cut 1.25% this year (5 cuts over two meetings). And see the spread of dots above (from highest to lowest), the FOMC is showing little to no agreement on what they should do. So on one hand there is an 11-1 vote On the other hand they published a wide dot plot... Add to this is Powell using the term "Risk Management" to describe this cut... It could thus be that "Risk Management" cut is a political decision. As Jim Bianco said "he wants to get Trump off his back". Source: Bianco Research
Mystery Trader Makes Record Bet On 50bps Rate Cut Today
The trade took place in the October fed funds, for an amount of 84,000 contracts which is equivalent to $3.5 million per basis point in risk. the price and timing of the trade was consistent with a buyer, potentially indicating a hedge against a half-point rate cut at Wednesday’s policy meeting, given a quarter-point cut is now fully baked into the swaps market. The CME confirmed this was the largest ever block trade in Fed Funds Futures... Source. zerohedge
From the FT article "Switzerland’s US tech ‘whale’"
>>> https://lnkd.in/e5ctdeTq "Switzerland’s conservative Central Bank has quietly become one of the world’s biggest tech investors, amassing a stock portfolio that is equivalent in value to nearly a fifth of the national economy’s annual output. The Swiss National Bank has US equity holdings amounting to $167bn, spread across more than 2,300 positions, according to US Securities and Exchange Commission filings from June. More than $42bn is invested in just five companies, Amazon, Apple, Meta, Microsoft and Nvidia, making it a major Silicon Valley investor. Its stake in Apple alone is worth nearly $10bn and its stake in Nvidia is more than $11bn. Though not a sovereign wealth fund, the SNB’s $855bn balance sheet of assets, including its tech holdings, put it in a similar league as some of the world’s largest state investment vehicles, including those of Singapore and Qatar". Source: FT, IMD
Happy FOMC day.
Stocks: all-time high Home Prices: all-time high Gold: all-time high Money Supply: all-time high National Debt: all-time high CPI Inflation: 4% per year since Jan 2020, 2x the Fed's "target" Time for the Fed to cut rates. Let's get this party started. Source: Trend Spider
