The market is reacting poorly to the latest federal reserve interest rate cut, as Fed Chair Jerome Powell signals a firm Fed pause is next.
The stock market wanted a treat, but it got a trick instead.
The federal reserve interest rate cut we all expected finally arrived late yesterday. The FOMC announcement confirmed a 0.25% cut.
So why is everyone in a bad mood this morning?
You can thank Fed Chair Jerome Powell. The Fed meeting results weren’t the problem. The press conference was.
It’s a classic case of “buy the rumor, sell the news,” but with a painful twist. The market had perfectly priced in the cut. What it didn’t price in was Powell’s new, cautious tone.
He basically told Wall Street not to expect another gift in December.
What the New Federal Funds Rate Means
This federal reserve interest rate cut brings the target federal funds rate to a new range of 3.75% to 4.00%. This is the second cut this year.
The goal was to help a slowing economy. Recent Q3 data shows that job gains have cooled, even if consumer spending remains solid.
But the Fed is still worried about one big thing: inflation.
Powell said the Fed is now hearing from a “growing chorus” of officials. This group is wary of cutting rates any further while inflation is still cooling.
This strongly suggests a firm Fed pause is coming.
The Market Reaction to the Fed
The market reaction to the Fed was swift and negative. The S&P 500 and Nasdaq both stumbled right after the press conference.
Investors heard “rate cut” but interpreted Jerome Powell‘s words as “hawkish.” This means the Fed is still more worried about inflation than about a stalling economy.
It feels like the Fed is trying to thread a needle while wearing boxing gloves. They are trying to be gentle, but the message still lands hard.
This Fed pause is the new reality. Here’s what it likely means for you:
- Mortgage rates will probably stop falling.
- Those high-yield savings account rates may stick around a bit longer.
- The stock market could be choppy as it gets used to this new guidance.
This FOMC announcement was a clear signal. The Fed is tapping the brakes on its own stimulus.
Jerome Powell has made it clear that while inflation is heading down, the fight isn’t over. As a result, the easy money is off the table.
All eyes are now on the December data. Will the “growing chorus” win, or will a slowing economy force the Fed’s hand again?
