Fed’s Third Consecutive Rate Cut Sparks Debate as Powell Warns of a Possible Pause
US Fed Policy: The US central bank, the Federal Reserve, cut interest rates by 0.25 percent for the third consecutive time and indicated that rates may remain stable in the coming months. The interest rate is now around 3.6 percent, the lowest in three years.
The US central bank, the Federal Reserve, reduced its interest rate by 0.25 percent on Wednesday for the third month in a row. But the Federal Reserve did hint that rates could remain stable in the coming months.
In a press conference, Federal Reserve Chairman Jerome Powell claimed that the potential rate cuts would be avoided by the Federal Reserve for the coming months and assess the health of the economy. Officials also included their quarterly economic forecast that rates may be reduced only once next year. After Wednesday's cut, interest rates remained at about 3.6 percent, the lowest in the last three years. The lower rates by the Federal Reserve could reduce mortgage, auto loan, and credit card payments over time. However, market conditions can also influence these rates.
Powell said, "We will carefully assess incoming data, and the key rate is close to a level that neither hinders nor stimulates the economy." Three Federal Reserve officials opposed the move. This was the strongest opposition in the past six years. This shows deep divisions within the committee. Two officials supported keeping rates unchanged, while Stephen Miran, appointed by Trump in September, supported a half-percentage point cut.
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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.
