Fed’s Third Consecutive Rate Cut Sparks Debate as Powell Warns of a Possible Pause

Earlier on Tuesday, the US stock market remained largely stable as Wall Street awaited the Federal Reserve's interest rate decision on Wednesday. The S&P 500 fell a marginal 0.1 percent on the day, remaining close to its record high set in October. The Dow Jones fell 179 points (0.4 percent), while the Nasdaq rose 0.1 percent.

JPMorgan Chase was the stock under the most pressure on the market on Tuesday. Senior bank official Marianne Lake said the bank's spending could reach $105 billion next year, up from this year's estimated $95.9 billion. However, she also said the bank considers its borrowers' financial positions to be quite strong. JPMorgan shares fell 4.7 percent. Toll Brothers' shares fell another 2.4 percent. The company reported weaker-than-expected quarterly results. CEO Douglas Yerley Jr. said that demand for new homes in many markets is low and inflationary pressures are deterring potential buyers.

Fluctuating mortgage rates are also impacting this affordability issue. These rates are lower than at the beginning of the year, but have risen slightly since October. This was largely due to uncertainty in the bond market about how many more times the Federal Reserve will lower its key interest rate. There was widespread expectation that the Federal Reserve would cut interest rates again on Wednesday, marking its third rate cut this year. Low interest rates boost the economy and investment, but can also increase inflation. The stock market has also reached record levels as investors anticipate a rate cut.

The biggest question now is what signals the Federal Reserve will provide regarding future interest rates. Wall Street expects it to try to limit expectations of a deeper rate cut in 2026. Even within the Federal Reserve, there is disagreement over whether the bigger threat to the economy is inflation or a slowing job market.