Fed Chair Jerome Powell answering questions at a news conference in Washington, D.C. Wednesday.
The Fed cut rates by 25 basis points Wednesday, but Fed Chair Jerome Powell said the prospects of further rate cuts at its December meeting were iffy.
The Federal Open Market Committee (FOMC) approved lowering the target range for the federal funds rate to 3.75% to 4% by a 10-2 vote, citing continuing economic uncertainty and indications that the labor market is continuing to weaken. It followed a 25-bps cut Sept. 17 — the first cut since it began raising rates in March 2022.
But Curt Long, chief economist for America’s Credit Unions, said Powell’s news conference “provided more intrigue, as he appeared to push back on the consensus view that another rate cut is coming in December.”
Powell warned that there were strong disagreements among members about the course of rates at its next meeting Dec. 9-10 as some worry more about inflation and others worry more about jobs.
“We continue to face two-sided risks,” Powell said. “A further reduction in the policy rate at the December meeting is not a foregone conclusion — far from it.”
Powell returned to that comment several times, once noting that it was different than his usual admonition that the FOMC doesn’t make decisions in advance.
The Fed meeting was the first since the federal government shut down Oct. 1, making key data such as the September labor market report unavailable.
Powell said the FOMC is able to assemble a picture of the labor market through state-level data on initial unemployment claims and various surveys, including its own Beige Book. He said there are other sources it is following to monitor prices.
“We’re not going to be able to have the detailed feel of things, but I think if there were a significant or a material change in the economy one way or another, I think we’d pick that up,” Powell said.
Long said “reliable economic data will remain in scarce supply until the government reopens, which further clouds the outlook.”
Mike Fratantoni, chief economist for the Mortgage Bankers Association, said the 25 bps cut met market expectations, and he does not forecast any effect on mortgage rates.
“Mortgage rates are currently around their low for the year and this has spurred both refinance and purchase activity,” he said.
Members voting against the 25 basis point cut were recent Trump appointee Stephen I. Miran, who preferred to lower the target range for the federal funds rate by 50 bps at this meeting, and Jeffrey R. Schmid, who preferred no change.
In the last cycle, the Fed began raising rates in March 2022, reaching a high of 5.33% from January 2023 through August 2024.
The FOMC’s first two meetings in 2026 are Jan. 27-28 and March 17-18.
Contact Jim DuPlessis at JDuPlessis@cutimes.com.
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