Sure, the Fed cut their overnight rate by 0.25% this week, but Chair Powell’s tone at the press conference afterward once again reminded us that the FOMC currently sees no justification to lower interest rates in the future. In fact, the prognosis now is for only one rate cut in 2026 instead of the 3-6 that many hoped for up until Wednesday afternoon.
Why? Current data sets suggest stronger economic growth around the corner paired with lower inflation. That combination tells us the Fed believes the economy can withstand tighter policy (higher rates) for longer, and they’re in no hurry to open the door to a series of cuts. So while the Fed may have taken a step toward a more accommodative stance by Wednesday’s move, their words are still focused on ensuring that inflation continues to move toward their 2.0% target.
The outlaid policy is a great compromise for a Committee who couldn’t come to a unanimous consensus. Several voting Fed Governors wanted no cut and some wanted a 1/2% to a 1 1/2% drop this week. I say as long as we’re dropping interest rates, I’ll take “all action and no talk” any day over merely blowing smoke.
