Federal Reserve Lowers Fed Funds Rate

Observant1

"In support of its goals and in light of the shift in the balance of risks, the Committee decided
to lower the target range for the federal funds rate by 1/4 percentage point to 3-1/2 to 3‑3/4 percent.
In considering the extent and timing of additional adjustments to the target range for the federal funds rate,
the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks."

"Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair;
Michael S. Barr; Michelle W. Bowman; Susan M. Collins; Lisa D. Cook; Philip N. Jefferson; Alberto G. Musalem;
and Christopher J. Waller. Voting against this action were Stephen I. Miran, who preferred to lower
the target range for the federal funds rate by 1/2 percentage point at this meeting;
and Austan D. Goolsbee and Jeffrey R. Schmid, who preferred no change to the target range
for the federal funds rate at this meeting."

https://www.federalreserve.gov/newsevents/pressreleases/monetary20251210a.htm

Observant1

"In conjunction with the Federal Open Market Committee (FOMC) meeting held on December 9-10, 2025,
meeting participants submitted their projections of the most likely outcomes for real gross domestic product
(GDP) growth, the unemployment rate, and inflation for each year from 2025 to 2028 and over the longer run.
Each participant’s projections were based on information available at the time of the meeting,
together with her or his assessment of appropriate monetary policy—including a path for the federal funds rate
and its longer-run value—and assumptions about other factors likely to affect economic outcomes."

https://www.federalreserve.gov/monetarypolicy/fomcprojtabl20251210.htm

JD_co

Divided between a weakening labor market vs. a high inflation environment. If not for the political pressure, I wonder if the Fed would really be cutting.

Had to give the markets a hit of crack to keep the party rolling.

Observant1

"The Committee is strongly committed to supporting maximum employment
and returning inflation to its 2 percent objective."

I question the Fed's committment to its 2% inflation objective.

Junkster

From Ryan Detrick - since 1980 the Fed has cut 22 times with the S@P near all time highs. In all 22 instances the S@P was higher one year later with an average gain of 14.2%.

Old_Joe

Wow!

JD_co

Prioritizing market returns "trumps" issues like affordability and healthcare.

Cutting interest rates is seen as the easy path to continued market performance. And per Junkster's comment, the correlation is rock solid in the short-term.

I only got a C in Economics class in college. I don't know "at what cost" this all comes.

Junkster

I rarely get into political talk here but a roaring stock market sure didn’t help the Dems in 2024. I also see no way the Republicans maintain control of the House in the mid terms. They would have a chance if Trump would zip his mouth but good luck with that.
I also think inflation is far from dead.

yogibearbull

Rate & QE Summary: Fed fund rate cut -25 bps to 3.50-3.75%, bank reserves rate at 3.65%, discount rate at 3.75%. A new QE started for buying T-Bills & T-Notes (up to 3 yr maturities). Futures reinvestments for Treasuries & Agencies will be in Treasuries.

Due to another commitment, I missed listening to Powell's presser, so no post-presser notes this time.

PRESSmUP

Jeffrey Gunslach’s post Fed meeting on CNBC was informative. He notes that the dollar is set to decline further, and suggests that the rise in local denominated EM debt is in its early innings.

Sorry, I can’t find a full video link.

JD_co

Per Wall Street Journal (bold added):

"Fed Chair Jerome Powell pointed on Wednesday to a job-market risk that economists have been worried about for months: Official statistics could be drastically overstating recent hiring.

Powell said that Fed staffers believe that federal data could be overestimating job creation by up to 60,000 jobs a month. Given that figures published so far show that the economy has added about 40,000 jobs a month since April, the real number could be something more like a loss of 20,000 jobs a month, Powell said."

dtconroe

Junkster said:

From Ryan Detrick - since 1980 the Fed has cut 22 times with the S@P near all time highs. In all 22 instances the S@P was higher one year later with an average gain of 14.2%.

I always get amused about investing based on "statistical trends". Sounds like a marketing advertisement, by a stockbroker, for "buy and hold" investing!

Sven

Here is Gunlach’s interview with CNBC that @PRESSmUP mentioned. Quite informative indeed.
https://youtube.com/watch?v=KXfVRg1y_Wo

hank

dtconroe said:

I always get amused about investing based on "statistical trends". Sounds like a marketing advertisement, by a stockbroker, for "buy and hold" investing!

"Buy and hold"? - Haven't heard that antiquated term in a long while.

I watch charts / trends and take those into consideration. I don't think anyone here is saying you should throw new money into equities. Some already invested may decide to hang on a bit longer based on past trends. The election cycles historically are pretty convincing - not fool-proof. I'm expecting checks to be mailed out to individuals before Nov. 2026. Details are cloudy. How that would affect the deficit, interest rates, equity valuations, inflation is worthy of contemplation.

Another related topic: Both the Wall Street Journal and Bloomberg's online (half decent) site are highlighting what appears to be an unusually sharp division among the voting members of the Fed. Powell's grip is weakening. That's newsworthy and bears watching. If Trump's pick to replace Powell finds himself / herself at odds with the voting majority we'll be in for some fireworks. Likely, Trump would seek to change the way the Fed operates and increase the power of his appointed chair thru mandate or legislation.
-

Forgive the personal reference, but I want to note that beer and burgers are doing well today. From my BARF basket ... HEINY +1.5% and WEN +3.7% at noon.