Topline
The Federal Reserve on Wednesday voted to lower interest rates for the second straight month, but the broader market reacted negatively after Fed Chair Jerome Powell suggested an additional cut may not come later this year.
Some policymakers have expressed caution about lowering rates further, while President Donald Trump and his recent appointee have pushed for steep cuts.
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Key Facts
The Federal Open Market Committee voted 10-2 in favor of easing interest rates by a quarter-point to between 3.75% and 4%, down from the 4% to 4.25% range policymakers opted for during the FOMC’s meeting last month.
Kansas City Fed President Jeffrey Schmid and Fed Governor Stephen Miran were the lone dissenting votes: Miran again pushed for a half-point reduction after dissenting in September’s vote, while Schmid preferred the Fed not lower rates at all.
In its statement, the FOMC held its review of the labor market, which notes that “job gains have slowed and the unemployment rate has edged up but remained low through August.”
The Fed appeared to acknowledge the ongoing federal government shutdown, adding “available indicators” suggest the U.S. economy has expanded at a moderate pace and that inflation has “moved up since earlier in the year and remains somewhat elevated.”
What Did Jerome Powell Say About Interest Rates?
Fed Chair Jerome Powell said in a statement that policymakers had “strongly differing views” about how to proceed in the FOMC’s last meeting in December. A further reduction to interest rates is “not a foregone conclusion,” Powell said, “Far from it.” Powell noted that while some government data has been delayed, public and private sector data that have remained available suggest employment and inflation have “not changed much” since the FOMC met last month.
Stocks Drop After Powell Cools Rate Cut Hopes
The Dow Jones Industrial Average (down 0.2%) and S&P 500 (0.3%) dropped on the day after Powell’s statements, paring back earlier gains on the day largely driven by Nvidia’s record-setting surge, which has held up the tech-heavy Nasdaq (up 0.1%) so far. Boeing (4.3%) headlined declines across the Dow, followed by Nike (3.1%), UnitedHealth Group (3%) and Home Depot (2%).
Will The Fed Lower Interest Rates Again?
Investors are favoring an additional quarter-point reduction to interest rates at the FOMC’s last meeting in December, potentially lowering rates to between 3.5% and 3.75%, according to CME’s FedWatch tool. In its meeting last month, Fed officials appeared to be divided over whether to cut rates for a third time this year. It’s unclear when the Fed will have insight into the U.S. economy’s health, however, as an ongoing federal government shutdown has postponed reports on inflation and unemployment. In a speech to the Council on Foreign Relations earlier this month, Fed Governor Christopher Waller said he supported the FOMC’s decision to ease monetary policy, indicating his focus had shifted to a “softening” labor market instead of inflation. Waller said that, because policymakers “don’t know which way the data will break on this conflict,” the FOMC would “need to move with care” when adjusting interest rates. Waller noted he has spoken with “business contacts” to form his outlook on the economy while a data blackout continues. Reports released from several firms and economists in recent weeks suggest the labor market has continued to deteriorate, suggesting the FOMC could have data to support an additional cut.
What To Watch For
Whether Trump names his pick to succeed Powell, whose term expires in May 2026, by the end of the year. Treasury Secretary Scott Bessent on Monday said five candidates are under consideration for the role, including Fed governors Waller, Michelle Bowman, former Fed governor Kevin Warsh, National Economic Council Director Kevin Hassett and BlackRock executive Rick Rieder. Bessent said he would present a list of candidates to Trump shortly after Thanksgiving.
Further Reading
Source: https://www.forbes.com/sites/tylerroush/2025/10/29/markets-tumble-after-fed-lowers-interest-rates-but-powell-wont-promise-another-cut/
