The Fed statement hints it may be done with cuts for now. Let’s discuss the real reason.
Please consider the FOMC Statement from the Fed’s December 9-10 Meeting.
Available indicators suggest that economic activity has been expanding at a moderate pace. Job gains have slowed this year, and the unemployment rate has edged up through September. More recent indicators are consistent with these developments. Inflation has moved up since earlier in the year and remains somewhat elevated.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months.
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. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
Three Dissents
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.
Stalled Progress on Inflation
The Wall Street Journal comments Fed Cuts Rates Again, Signals It May Be Done for Now
The Fed voted 9-3 for the reduction on Wednesday, the first time in six years that three officials cast dissents. Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeff Schmid thought the reduction wasn’t warranted, while Fed governor Stephen Miran favored a larger, half-point cut.
Public comments from Fed officials in recent weeks revealed a committee so fractured that the decision likely came down to how Fed Chair Jerome Powell wanted to proceed.
Powell’s term as chair expires in May, meaning he will preside over just three more rate-setting meetings. President Trump has said he is close to naming a successor—raising questions about whether whoever follows will be able to command the same deference.
Inflation-wary hawks see a central bank cutting into an economy that is stronger than it looks and worry that interest rates may no longer be high enough to put downward pressure on inflation. That’s a bigger worry with each passing year, since inflation has been running above the Fed’s target since 2021.
By contrast, employment-focused doves see little evidence that lower rates are reviving sluggish housing and labor markets. They worry the risks are asymmetric: If unemployment accelerates, fixing it will require far more aggressive action than if inflation lingers near 3%.
The combination of firm price pressures alongside a cooling labor market presents an unsavory trade-off for the Fed, one it hasn’t faced in decades. When officials confronted a similar dilemma, during the so-called stagflation of the 1970s, the central bank’s stop-and-go response allowed high inflation to become entrenched.
Nathan Sheets, global chief economist at Citi, said he is watching January price data to see if businesses that have held back tariff-related cost increases reset prices higher at the start of the year. “If we are going to see more tariff pass-through, the natural time for it to come is during those annual pricing increases,” he said.
Sheets is among those who worry the Fed has little margin for error on inflation. The Fed targets an inflation rate of 2%, but a key measure of inflation stood at 2.8% in September.
“I don’t think inflation is going to break out on the upside, but by the same token, you’re not at 2% and there’s no compelling narrative that you’re going to get back to 2% anytime soon,” he said. “And that definitely gives me pause.”
FOMC Press Conference
The press conference is live at 2:30 Eastern.
The press conference rates to be interesting.
The Fed Will Soon Have Its Hands Full
One reason to cut now is the Fed may have a hard time next year.
That’s a bad excuse but I believe it’s how the Fed thinks.
Spotlight Health Care
The Fed’s preferred measure inflation is the Personal Consumption Expenditures (PCE) price index.
The PCE puts a much higher weight on health care than the CPI. And health care costs are soaring.
I discussed Obamacare in my post How Much Will 4.5 Million Florida Residents Pay for Obamacare in 2026?
Florida has over ~4.7 million residents enrolled in ACA exchange plans, 97% of whom are currently subsidized.
A 64-yr old couple earning $90,000/yr would go from paying $637/mo to a jaw-dropping $3,176/mo…or FIVE TIMES AS MUCH FOR THE SAME POLICY. That’d be $38,000/YR IN PREMIUMS ALONE, or 42% OF THEIR GROSS INCOME.
The KFF foundation estimates an average 114 percent increase, so I don’t doubt the numbers presented, or the rationale that Florida will be worse than average.
More importantly, to the PCE, Medicare and corporate healthcare costs are soaring.
The average rate increased for both are about 9.25 percent.
Health Care Inflation Bomb Makes the Fed’s 2 Percent Target Almost Impossible
On December 8, I commented Health Care Inflation Bomb Makes the Fed’s 2 Percent Target Almost Impossible
Let’s discuss 2026 health care premiums and what they mean to the Fed’s preferred measure of inflation.
I expect a rise in the Health Care weight in the PCE. I also expect a net 1.5 percentage point increase in PCE inflation in 2026 due to health care.
These estimates stem from health care price hikes across the board (Medicare and corporate plans), not counting the huge ACA impacts.
The Fed’s PCE inflation target is 2.0 percent. If I am in the ballpark, health care alone rates to take up 1.5 percentage points of that target, again, not counting Obamacare!
Unless jobs collapse, and they easily can, the Fed is going to struggle to justify rate cuts. And if they do cut, the most likely reason will be jobs. It’s not a good place for the Fed.
Click above link for details and the health care math.
Insurance and Health Care need to be run on a non-profit basis. That will cure part of our misery with trying to remain healthy or get quality health care.
Only 11 months and the Fed has to resort to QE again…
The optics are bad.
The problems are worse!
Hillbilly republicans return to control and things start falling apart. It’s not a coincidence.
Is it true that “Powell announced that the Fed will begin a new program of “QE Lite,” purchasing $40 billion in Treasury bills every month.”?
If so, that’s the real story.
he opened up remarks hour saying he was purchasing more now. later in the hour he said it was for april 15th. bwaaaaaaahhhhhhh. ok jerome.
Yep. He picked door number 3: monetize the debt, because he can’t get Trump and the Congress to stop spending money they don’t have.
At this stage you can’t stop money spending.
If you cut spending ,you contract the economy and lower inflation.
If inflation falls,the pile of debt explodes in value.
Unless you do a reset,bankrupcy or whatever criminal action(war,viruses,etc…),there’s no way out.
Reevaluating the gold will only save you some time,nothing more.
the true root cause for the FED. our third central bank. it’s worth a quick skim. https://en.wikipedia.org/wiki/Panic_of_1907
In a democracy, it’s not politically possible to cut the big entitlements, and interest on the national debt is impossible to cut, unless we’re prepared for the fallout from default. Interest on the national debt is the #2 item in the federal budget and it’s been rising pretty fast. For Calendar year 2025, it’ll be about $1.3 trillion. Only SS is a bigger number. It’s $2 to $3 trillion in deficits as far as the eye can see. Expect $50 trillion in debt in 7 or 8 years. These are staggering numbers and by then I expect us to be in a Great Depression Part 2.
Q: “We’re interested in the seizure of this tanker. What happens to the oil on this ship?”
Trump: “Well, we keep it, I guess.”
If the US succeeds in “regime change” in Venezuela, I hope it does a better job than it did in Afghanistan where we installed a ruler who folded like a cheap deck of cards and flew off with millions as soon as we pulled out.
Afghanistan had no oil,so you can bet they will do a better job putting their hands on it.
Yo ho, yo ho! A pirates’ life for me!
Just in: PedoPig pirates Venezuelan oil tanker,
Pretends to promote
Peace!
Film at 11
The FED was created to back up the banks when they serially had lent much more than there is purchasing power to repay themselves…and then when we have severe cases of this…to bail out the banks while ignoring the victims of the banks’ monopoly paradigm of Debt Only, namely the individual economic agent whose purchasing power is meager to begin with and worse when inflation followed by deflation makes it even worse.
The FED’s charter needs to be amended to break up the banks’ monopoly paradigm for the creation and distribution of all new money expressed above by having it create the rebated monetary gifts back to retail merchants (including Finances retail point which is one’s monthly auto, mortgage etc. payment) so as to make those merchants whole on the 50% Discount they have agreed to grant to the consumer.
This single policy resolves the deepest probems of modern economic systems and would usher in universally abundant individual purchasing power and the most stabily profitable period in capitalism’s history.
glad to see someone get the great swindle. whenever i walked by the NYFED for many years, including recently i always touch it, and LOL, as the greatest swindle in an empire of grifters. cracks me up people believe what powell says.
Repealing Glass-Steagall was the beginning of the end.
The beginning of the end was when Reg. Q ceilings were raised 5 times beginning in Jan 1957. Banks don’t lend deposits. Deposits are the result of lending. The banks can’t attract outside savings. Only the FED can create deposits. The economy has been run in reverse.
not quite. the beginning of the end was when the 3rd central bank scheme was having conferences in the heartland to convince the farmers…..to sign onto the legislation. at the appropriate time. the panic of 1907 aka the knickerbocker crisis, was that time. the rest is eyewash. creature from jekyll island book explains it best.
Lending/investing by the commercial and reserve banks is inflationary. Lending by the nonbanks is noninflationary. The Golden Age in Capitalism was driven in 2/3 by velocity.
There are numerous causes of inflation. The way to end inflation forever is enabling everyone to purchase $100 worth of groceries for $50 and 50% off the price of virtually every other thing you buy at retail sale with a 50% Discount/Rebate policy.
I don’t think the math works, bro. I was around for 1979 and 1980 and the inflation back then didn’t feel like it does now. I was living in a very nice Victorian house in New England and the mortgage payment was $234 a month. With real estate taxes it was less than $300. That’s about 10 times less than what people are paying now for the same house in New Hampshire.
Thats because “free” market theoretics is a ruse and a misnomer for chaos which is the absence of known and enforceable barriers. That makes it a fetishized framework of TOTAL FREEDOM that cannot be touched even though in the human universe where morals and ethics count there is no such thing as total freedom. And yet libertarians mistakenly like to hit everyone over the head with “free” market theory.
I suggest we enable commercial agents to raise their prices a maximum of 2% per annum and tax any additional price rise at a rate of at least 100% so with demand doubling with the 50% Discount/Rebate at retail sale there is a lot more money for commercial agents to compete on price for but greedflation is stopped.
“The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.”
The unemployment rate is still very low and inflation is running 50% higher than their target. Seems to me they aren’t as ‘strongly committed’ as they claim they are.
Both long-term and short-term monetary flows are headed lower. Things peaked in November.
they are hoping to rev up the money printer while keeping inflation low via thoughts and prayers.
So you trust these numbers?
Remember they need big inflation to kill the debt.Hiden inflation.
The only explanation for what the Fed did today is they know another financial crisis is about to hit.
Meanwhile, the ‘War on Narco-Terrorism’ continues. The only way the US can defeat narco-terrorism and spread freedom and democracy is to gain control of Venezuela’s oil supply.
with covid they proved nothing could stop them. They made markets go up during a global plague. Their power is unlimited. They don’t need to tweak rates as if they need to correct course to avoid an iceberg miles away. They cut today to fulfill their true purpose, to transfer wealth upward. They’ll continue to do that. The more unprepared they are for financial crisis, the better as it justfies more extreme inflationary measures they must to take to sAvE tHe DaY,,,
I think the resumption of treasury purchases is just to foam the runway, as they know a crisis is inevitable. Printing presses need to be warmed up if they haven’t been used in a while.
The FED just doesn’t’ want tax receipts to fall.
Agree with you.
Untill the hiden inflation is killing the real economy.
We’ve got one of their tankers now… he must have heard you.
everything is too fucking expensive. i hate this fucking bullshit country
you ain’t seen nothin’ yet. more to come and the prez will tell you it’s a hoax.
the trump grifter family and oligarchs of swindlers will steal everything not nailed down, and some things nailed down. saw this in russia in 90s. crumbling empires sometimes end like this. MAGA morons will applaud the whole way down. losers win by losing. hat tip ed seykota.
I expect to see hyperinflation in the usa within my lifetime. I feel like I don’t have a future no matter what I do
How old are you to believe you have no future?
Hyperinflation is more than money printing. It also requires a political crisis too. If it ever happens in the USA it will happen world wide because the USA is too intertwined with the rest of the world. That would bring about social unrest on a level VERY few people would want to live through unless you are an anarchist.
when USSR collapsed, i was eyewitness to what happened in moscow and leningrad. had a oligarch as a client. it was hyperinflation as the ruble went to zero and the entire system was kaput. the 20 and 30 somethings could handle it. the old geezers north of 30s were like deer in headlights. people survive. resort to all sorts of things for hard currency. doctors become whores…….and much worse.
An interesting post. So true.
Hyperinflation is a complete loss of faith in currency.
Every hyperinflation in history was caused by a political event, not a monetary one.
You mean war?
AI + robot workers will save us all!
Yeah, the federal deficit is unsustainable.
Just buy less. President PedoPig says your little ones don’t need Christmas toys!
Hate the banksters, they are responsible.
Trump’s tariffs aren’t exactly making things better. I’m shocked we’re not seeing more inflation.
The banker’s master says inflation for 2026 will be at 2.9% US and 3.4% globally. For those that don’t understand, that means if you make $100k per year, you will lose $2900 in purchasing power.
https://www.mastercardservices.com/en/advisors/economic-consulting/insights/economic-outlook-2026
Cutting rates and Trump tariffs are a recipe for inflation disaster but even if those two things are mitigated, you then have the health insurance spike, electricity rates spike and food spikes. Oh and a diminishing labor participation force as a cherry on top.
Fixed income fellas are gonna be in a world of hurt because…..
“It’s Trump turtles all the way down and inflation all the way up!”
US siezes oil tanker off Venezuela coast
Hmm, sounds like the Dept of War
After Fed announcement
that’s pax dumfuckistan’s oil. just happens to be in VZ. we own the world.
Again, the key question must be: what the hell does monetary policy have to do with healthcare inflation? The answer is: absolutely nothing.
Not all inflations are the same, nor are they cured the same way.
If the Fed decides not to cut because of healthcare inflation, that is a) silly, and b) contrary to proper theory. In fact, what academics define as inflation is a “general increase of the price level”. So, if one or two items drive most of the inflation, that is not the type of inflation that monetary policy can deal with.
And yet, there are so many superficial pundits about this inflation thing.
Nothing, but it’s how the idiots at the Fed think.
Same thing with inflation expectations
if you believe the FED are idiots, i think you must be joking. it’s a swindle. always has been. the 3rd central bank of USA. hat tip to NYC bankers. the owners. the top of food chain of a grifter empire. grifters from bottom to top. dishonest grifters are the easiest to fool. read “confidence men” for a textbook explanation.
they could simply stop because inflation is already way too high instead of firing up the printing press and inflating the everything bubble
Good article here:
“Good article”? Disagree. Wolf offered no analysis or insight into what went on today, but then throws “Circus” in the title to get clicks.
Wolf has always been PRO FED
Powell has no principles. He just doesn’t want Trump bothering him during the last 5 months of his term.
This rate cut was pure madness. Wage growth is well over 5%, so the labor market clearly has lack of competition, which is the only thing that would enable this extreme level of wage growth. Furthermore, in this “low fire, low hire” employment environment, it has been widely reported that a large component of the “no hire” mindset among employers is uncertainty over the strength of AI job replacement over the next year. Cutting rates will have zero impact on that mindset, and will thus have essentially zero impact on hiring decisions. The Fed statement that the FOMC is “balancing employment and inflation risks in favor of labor” is completely disingenuous, as their rate cut will only bolster wage growth further through the “inflation channel”, and the inflation channel is exactly what they are not managing!
fed has only one goal. to keep the owners, of the NYFED, the banks in high cotton. the rest is basically rubbish to keep the hicks and dicks distracted. read “creature from jekyll island” and get up to speed.
Bottom line: Net effect is *much* higher price inflation. Wage growth will soon be drowned out entirely, as *real* job losses start to occur due to genuinely “too high” prices. It will take a few months for all that I’m saying here to bleed through, mostly in the form of higher long term interest rates, so some patience is needed. If what I’m saying is not showing up in the economic trends six months from now, I deserve to be blasted.
“Wage growth is well over 5%, so the labor market clearly has lack of competition, which is the only thing that would enable this extreme level of wage growth.”
Post Plandemic Medical Tyranny – Almost Everything Has Doubled.!
Housing, Rent, Insurance, Property Taxes, Health Care, Groceries,
Gasoline, Diesel, Vehicles, Utilities, Wood/Building Supplies, Etc.!
All the people caught with the margin calls recently needed a little help from the FED.
Plus if you cut the rates,you can borrow more to buy 10 years treasuries to keep the 10y rates down.
quantitative easy, printing money has restarted again. must be a bit of panic at fed. perhaps to help the war effort for the usa oil located in venezuela.
Thank God! Now the economy will take off like a rocket.
This is all I was watching for, along with hawk/dove tone of JP presser: “will initiate purchases of shorter-term treasury securities as needed to maintain ample supply of reserves on an ongoing basis.”
With a less hawkish/more dovish tone and presser than expected, I’m cautiously optimistic for bulls once this is digested.
A Classic … Sell the (well-anticipated) news …
Trump got what he wanted, another rate cut. However Trump is being criticized for not doing enough about the rising cost of living…. and this rate cut isn’t going to help.
when you have such a pile of debt,the only way you survive a bit longer is when you have inflation.
Inflation kills partly the debt.