The market expectation ahead of the meeting were roughly a coin toss but the Fed pulled the trigger on a half-point. 
Federal Reserve FOMC Statement
Please consider the Federal Reserve FOMC Statement.
Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have slowed, and the unemployment rate has moved up but remains low. Inflation has made further progress toward the Committee’s 2 percent objective but remains somewhat elevated.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.
In light of the progress on inflation and the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/2 percentage point to 4-3/4 to 5 percent. In considering 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 will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. 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.
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Thomas I. Barkin; Michael S. Barr; Raphael W. Bostic; Lisa D. Cook; Mary C. Daly; Beth M. Hammack; Philip N. Jefferson; Adriana D. Kugler; and Christopher J. Waller. Voting against this action was Michelle W. Bowman, who preferred to lower the target range for the federal funds rate by 1/4 percentage point at this meeting.
In early July my guess was the Fed would cut rates by a half-point. I was correct but the path was shaky.
Following the CPI report on September 11, the odds dipped to 15 percent.
For discussion, please see The Cost of Rent Up 0.4 Percent Again, CPI Rises 0.2 Percent in August
However, over the next two days the odds of a 50-basis point cut jumped to as high as 65 percent on a favorable PPI report and import-export prices.
So here we are.
Note that my prediction is what I expect the Fed to do, not what I think they should do.
For discussion, please see Elizabeth Warren Asks the Fed for a Three-Quarter Point Interest Rate Cut
If it’s a replay of the 70’s, inflation will rise.
As I said: “May 22, 2020. 01:49 PMLink
As announced on March 15, 2020, the Board reduced reserve requirement ratios to zero percent effective March 26, 2020.
But “the Federal Reserve Board on Friday announced an interim final rule to amend Regulation D (Reserve Requirements of Depository Institutions) to delete the six-per-month limit on convenient transfers from the “savings deposit” definition. The interim final rule allows depository institutions immediately to suspend enforcement of the six transfer limit and to allow their customers to make an unlimited number of convenient transfers and withdrawals from their savings deposits at a time when financial events associated with the coronavirus pandemic have made such access more urgent.
The regulatory limit in Regulation D was the *BASIS FOR DISTINGUISHING BETWEEN RESERVABLE “TRANSACTION ACCOUNTS” AND NON-RESERVEABLE “SAVINGS DEPOSITS” The Board’s recent action reducing all reserve requirement ratios to zero has rendered this regulatory distinction unnecessary.
“The FED using interest rate manipulation, will thus lose control of the money stock as money velocity begins to accelerate.”
We will know less and less about money and money flows.
Which is fine. If Trump wins, its his second term (maybe) so what does he care about inflation? He cant run again. Biden would also have been stopped at a second term so he wouldnt have cared either. Kamala if she wins may care, but not 4 years out. With 0%, we will have inflation and no one at the top will care.
As other commenters have suggested the Fed is merely keeping up with market force demands on sovereign debt instruments. This is historical in that US equity prices will blow off with some daily higher high price gaps to a final new high ending Wednesday 25 September 2024 – some will question the wisdom of the Fed’s first rate cut as inciting equity, commodity, crypto, gold et.al asset inflation. The Russel 2000 is following an 11 Sept 2/5/1 of 5 day :: x/2.5x/2.5x daily fractal growth pattern ending 25 Sept.
We don’t want Trump back in office.
Regards,
Jay Powell.
why not?? Trump appointed Powell.
Seems the fed just confirmed a recession is on the horizon.
If any of us buy the Fedmasters’ yak, why not put them directly in command of specific parts of the economy. Guys this alert to data could take over ordering, production, distribution and pricing of just about everything.
As of 3:40 this afternoon, it looks like gold speculators have outdone the stock market geniuses. Wonder who owns the $2,600 print?
I still have a sizeable sack of gold in a deposit box purchase the year prior to the GFC at $700ish… it will also go to zero but the reason for holding onto it is to hedge against the short period when hyperinflation is arriving… it will preserve a bit of buying power just prior to the total collapse
I think we achieved the 2% inflation by 15x in the past couple years so no more thx.
Interestingly, stocks are ‘wavering’ as the markets digest 0.5% Not enough? Or maybe if the rate cut is viewed as favoritism to Harris, the cut will actually play to Trump’s advantage. Oops, Powell didn’t think of that!
IWM is up 7% over the last 5 days. Easiest money ever made, all people had to do was just pay attention and take action. The Fed rate cut strongly favors small cap stocks so that’s where the action is at.
I hope people here had multiple profitgasms like I did today. ……$…….$…….$
My approach has always been not bragging, and building wealth by superior performance in the long haul. Short term gains tend to be ephemeral; and bragging is what Trump does.
Your approach is “secretly get rich and tell no one” is that it? It’s a secret “superior performance” that only you know about because that helps the community? Maybe you don’t want to post anything because the internet never forgets and when you’re proven wrong it will be too much for you to handle?
All I am trying to do here is enlighten people to another way beyond endlessly whining about the Fed, Biden, Trump, whatever. The only true freedom is enough profits to allow you to move wherever you’re treated best. It’s that simple.
” . . . move wherever you’re treated best.” Uh, do we bring our wives?
Only if your wives are an asset and not a liability.
so when family gets sick or infirmed or lame, just ditch them. too much of liability. got it. you must be an objectivist. btw i agree on being long small cap russell 2000 at this juncture……….good call. i’m with you on that. i gotta go. bye. now is the time to push momma down a flight of stairs……..
How much clearer can I be? Yesterday, I responded to a comment by Jojo about the Fed using 3-month moving averages in lieu of monthly data.
I described (in basic terms) a better method to track long-term trends, cycles, and ‘interventions.’ I subsequently followed with an AI-generated review of a small part of the method–specifically cubic splines–although I had referred to ‘polynomials,’ (my analysis used up-to 7th order–the principle of parsimony is important). The AI-review indicated some important issues, and the reliability of the method.
There are no quick tricks to making money above the average return for a given risk level. If there were, any advantage would be gone overnight with computerized trading. That leaves insider trading and market manipulation, highly customized analysis/methods, and better information (aka research). Everything else is a roll of the dice. You win some, you lose some.
Jeff Green builds wealth by trading in used Teslas.
Yeah, at 3:49 my SRTY is off $0.01.
Show us your Trade Confirmations, and black out the acct number and Name and then we can talk.
NO?
There is no way to upload images here but there’s no need, just follow my comments and you’ll know what I’m doing.
A feel good cut before the elections. Lots of geopolitical risk out there is about the only good rationale with record public debt.
40% of Federal government spending is borrowed money. They need low rates to keep up the deficit spending and to pay the interest on the tens of trillions in debt (and counting). Spend spend spend!
And we’re back to lose-lose. A few short-term gains for Wall Street and then we can relive the Great Inflation.
Meanwhile, Kamala is on her knees, thanking Powell for not being ‘political.’
Financial conditions were very loose before the cut (looser than 2019 at this time of the year), and will now be exceptionally loose after the cut. Aka overheating.
Goldilocks is seeing a lot of contradictions in Jerry’s talk. The economy is strong. We have conquered inflation, even though its not at our 2% target. We see no layoffs, yet employment numbers were clearly fudged. The dual mandate is a logical contradiction in reality, which is where we all have to live.
The only reason “The dual mandate is a logical contradiction in reality” is because everyone’s selectively misinterpreted the actual law.
In the actual, legal, language of the Federal Reserve Act (12 USC 225a), there’s really only a single mandate:
“[The Fed] shall maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production…”
but then the mandate above is explained a bit in terms of 3 (NOT 2!!) goals:
“… so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.”
It is pure gaslighting for the Fed to misrepresent this language as a “dual mandate” for “low unemployment” and “2% inflation”.
The Fed is made up of economists. Remember back to graduating from college, then taking the state exam for CPA, Engineer, Pharmarcy, Medicine, etc. Well there is no exam for econmists. Economics is not science.
it was properly in philosophy departments at academies for 2000 years. just recently the computer printouts tricked them into thinking it was some science. it’s not.
This is foolish from an economic viewpoint as inflation will accelerate.
OTOH, 1/2% should offer a strong boost for the Harris campaign, which may have been the real reason that the FED cut now.as many in power see Trump as a clear and present danger to the economy and the world.
LOL
Agree with your assessment. If I were the Fed I wouldn’t have cut at all knowing inflation is the biggest threat aside from a demented President Trump at the helm of the country.
President Harris will sail through to the White House now. I had hedged my portfolio for both a Trump or Harris wind but I will now shift more toward Harris profit matrix.
It’s time to dump T-bills too.
Many in power see Trump as a threat to their power.
yes, but not his kids, kids in law or business associates which are who he appointed last time.
I agree. The totality of the data does not support a 50 BP cut. They’re trying to gift Harris lower rates and also push down yields on treasuries, since we’re going to spend at least $1.1T in interest expense this year.
This is the first REAL indication that the Fed / Treasury is starting to panic over our growing debt problem. Like someone posted above, we’re borrowing 40% of what we’re spending, so something has got to give.
Transitory inflation to jobs to interest expense.
the cut was because they should have cut already. it will have zero impact on the election.
Oh, yes it will have a small effect, especially for those who vote primarily with their pocketbook. It could move 1-2% of the electorate.
It’s about optics.
The funny part is that the Sept jobs data may turn out to be fairly good like August and core inflation may continue to rise slowly.
If so, as the Nov data is revealed with the election being determined, we may begin to see the Fed with egg on its face and how JPowell the emperor has lost his clothes.
There’s very little economic data to suggest that a recession is right around the corner. If we don’t have a recession in the next 6 months, we’re going to see headline CPI start to rise. I’m not saying 5-6%, but upwards of 3% would be bad for the economy.
I can’t see 50 basis point helping or hurting Cackles.
Since the Fed’s explanation for lowering rates doesn’t make sense in a U.S. domestic context, I suspect they are lowering rates for other reasons – perhaps trying to keep Japan, Europe or China from imploding.
Then I’m reminded of the 1927 decision to needlessly lower rates here to aid France.
The inevitable collapse of the ensuing credit bubble was the proximate cause of the Great Depression 1929-1930s.
Trump response:
“The failing Federal Reserve has cut rates in a desperate attempt to help loser – and total communist – Kamala Harris win, but it will not work. The American People love their dogs and cats and do not want them to be eaten.”
OK, I made that up.
Balance sheet runoff continues … Normalization. Confusing.
10 Year = 3.64%. Same as yesterday. Mortgage rates essentially unchanged from yesterday. So far, at least.
All participants wrote down multiple cuts! Reeeeeeeeeeeeeecession!
The dollar is falling. The price of imports will rise and add to inflation.
Yep! It’s like a tariff.
Yep! It’s like a tariff, but . . .
And, it’s a big but. There’s no guarantee that a small to even modest drop in the value of the dollar is going to result in a meaningful rise in inflation. The exporters & importers together “MAY” have enough gross margin to absorb the decline the dollar.
Without doing an exhaustive analysis, this is a big reason why Trump’s tariffs didn’t add meaningful inflation during his term. The exporters & importers absorbed a good portion of rise in prices.
So does the question now become: Do they call a meeting in October, and if so, will it be another .50BP or simply a .25BP?
I am going with the .50BP in Mid-October due to a special meeting/session called to address the inability for people to buy homes, cars, and pay off school loans.
This is for the little guy you know, and just in time for the Elections. Hmm… funny how that timing keeps happening on all sorts of issues, from Trials to Finances…
Depends on if Harris is ahead of Trump or not.
Statement adds language to say the committee is “strongly committed to supporting maximum employment” in addition to returning inflation to its 2% goal
Statement says that “in considering additional adjustments” to rates, officials will assess incoming data, evolving outlook and balance of risks
If Harris is ahead, she does it to stay ahead, and if behind, she does it to get ahead.
It’s happening, but how much?
Jerry says all is well. Don’t panic. Buy the rip! Lol.
Half point with asset prices at all time highs. Makes sense
As expected, powell and company are committed to supporting the equity market to new highs, as well as the current administration’s chance in the upcoming elections.
Powell keeps his job.
so why don’t you use this knowledge to make money in the equity market?
Off Topic: https://www.freightwaves.com/news/report-biden-wont-block-dock-strike
The doc strike will have a significant affect on the economy and election. People won’t be happy when there are hundreds of ships at sea and unliminted number of containers sitting at the port that won’t be unloaded,
These unions need to be crushed and put out of existence. Our ports don’t compete with the rest of the world and we are being held hostage.
Speaking of the docks:
Reminds me of a scene from Deliverance.
Please explain.
Lol
I knew someone who typed the book for James Dickey, back in the late 60s. Deliverance was published in 1970. A Southern gal. She’s dead now–it was quite an experience working with the guy. Dickey was a hero in WW2–5 Bronze stars
Its an early cut but the rates will be going down a lot bigger than this in 2025. Gotta get the votes of all the interest-loving older people first.
Boomer 401k and IRA accounts have to be drained to keep the economy going, it’s the only private source of buying power left.
Keeping interest rates near zero is an effective way to drain them.
Money will move in and out of all accounts all the time. What they want to do is provide cheap capital to the wealthy class so they can continue to buy up America as they have from 2008-2020. And neither Trump or Kamala will care one bit about inflation at this point. So who cares about zero percent rates?
The Fed Put to encourage people to continue living an overextended lifestyle, verified. CPI inflation back to 4.5%+ within eight to twelve months.