Stocks Have Begun to Waver on Powell’s Comments

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The S&P 500 and Nasdaq traded lower during Federal Reserve Chair Jerome Powell’s press conference Wednesday afternoon.

According to a study updated in late 2024, Powell’s off-script words during press conferences about interest rate hikes frequently rock financial markets, usually pushing in the opposite direction as the Fed policy committee’s official statements, and causing much more volatility than previous Fed chairs Janet Yellen and Ben Bernanke.

Powell Says There’s a “Curious Balance” in the Labor Market

6 minutes ago

Fed Chair Jerome Powell said immigration policies are having a more significant impact on the labor market than tariffs.

As being elected, President Donald Trump has cracked down on immigration, both at the border and through mass deportations.Those policies have reduced labor supply and demand,Powell said.

“If you’re looking at why employment is doing what it’s doing, that’s much more about the change in immigration,” Powell said. “We see what I call a curious balance, typically when we say things are in balance, that sounds good. But in this case, the balance is as both supply and demand have come down quite sharply.

Fed Signals More Rate Cuts, But Disagreement Remains

Fed officials’ latest quarterly projections sent the message that more rate cuts are coming, but the exact number is still being debated.

The Fed’s dot plot is anonymous, but you can still see the divide between the officials. Nine Fed officials believe the Fed shoudl cut rates twice more this year, while two think just one cut is appropriate.

Six others are leaning toward staying on hold after today’s cut, while one Fed official’s projections suggest thay disagreed with today’s cut. Not all FOMC officials vote every year, as the 12 regional Fed presidents rotate into voting spots.

“Rather than looking at this as certainty,I would encourage people,as always,to look at the SEP through the lens of probability,” Powell said during his press conference. And so there are different possible outcomes and likelihoods, rather than this one is certain and this one isn’t happening.”

• Polo Rocha

Fed Faces a “Challenging Situation” Powell Said

the Federal Reserve policy committee faces a “challenging situation,” according to Chair Jerome Powell.

Powell said there is a risk of lower employment and higher inflation,putting the Fed in a difficult position.The Fed is tasked with keeping unemployment and inflation low.

Their main tool for both is the fed funds rate. The Fed cou

Fed Eyes Two More Cuts This Year and One in 2026

1 hr 4 min ago

Federal Reserve officials are now forecasting two more interest rate cuts before the end of the year, and one additional cut in 2026. They also generally see inflation continuing to trend toward their 2% target. The median forecast suggests the Fed’s main inflation gauge could end the year at 3.1% before slowing to 2.6% in 2026. that, however, is slightly more than the 2.4% rate that Fed officials foresaw in June for 2026, suggesting they see some inflationary pressures persisting.

-Polo Rocha

Markets React to Fed’s Interest Rate Cut

55 minutes ago

Stocks rose, and bond yields slipped moments after the Federal Reserve announced it was cutting its influential interest rate.

The S&P 500, which was down 0.1% shortly before the Fed published its decision, recently was up 0.2%. The blue-chip Dow Jones Industrial Average added to gains and was up 1%, while the tech-heavy Nasdaq pared losses and was down 0.3%. The 10-year Treasury yield, which was at 4.05% just before the announcement, was more recently at 4.01%.

To follow live coverage of the financial markets’ reaction,click here.

-Aaron Rennie

Fed Cuts Key Interest rate For First Time As December

The Federal Reserve has cut its key interest rate, reducing borrowing costs in an effort to boost hiring and prevent a surge of unemployment.

The central bank’s policy committee voted Wednesday to lower the fed funds rate by a quarter-point to a range of 4% to 4.25%, the first cut sence December and its lowest level since December 2022.

Stephen Miran was the only one to dissent from the decision, voting to cut by half a percentage point.

Far fewer jobs were created in August than expected, and economists are worried that employers are beginning to pick up the pace of layoffs.

Read more about the interest rate decision here.

Dissents Could show a Committee Divided

A remarkable number of FOMC members could dissent to today’s interest rate decision, according to analysts.Two Trump appointees to the Fed, Governors Christopher Waller and Michelle Bowman, could vote for a more aggressive cut than the expected quarter-point. The two dissented at the Fed’s last meeting and may do so again on Wednesday.

Fed Governor Michelle Bowman was one of the recent dissenters.(Al Drago / Bloomberg via Getty images)

If Trump’s new appointee Stephen Miran follows suit, it would signal a significant divide within the committee. Some have questioned whether the Fed’s upcoming interest rate predictions are effective. The Fed’s economic projections are made based on current conditions and available data. As the economy changes,the predictions also change.

Click here to read more about the most recent projections ahead of today’s update.

-Terry Lane

Market Anticipates First Rate Cut of the Year,S&P 500 Poised for Volatility

The S&P 500 is expected to move by as much as 0.6% in either direction today, following the Federal Reserve’s meeting. This potential swing would mark the index’s largest post-Fed-Meeting move since March, when it rose 1.1% after policymakers maintained their full-year interest rate forecasts amidst growing economic uncertainty.

Federal funds futures trading data indicates a 94% probability of a 25 basis point rate cut on Wednesday morning.there’s also a 6% chance the Fed will lower rates by 50 bps,mirroring the start of last year’s rate-cutting cycle in September.

Trump is Looking for a Massive Rate Cut

While a rate cut is widely anticipated, it’s likely to be considerably smaller than President Donald Trump’s request. On Monday, President Trump renewed his call for a “significant” cut to the fed funds rate via social media. The Fed previously cut rates in July.

What Happened at the last Fed Meeting?

3 hr 57 min ago

The Fed’s policy committee voted to keep the central bank’s key fed funds rate unchanged for the fifth meeting.

Two members dissented from the interest rate decision for the first time this year and voted to cut rates by a quarter of a point.

Fed officials said they held the rate steady at a higher-than-usual level to tamp down on stubborn inflation and voiced concerns that Trump’s tariffs could exacerbate the issue.

Read more about last month’s meeting here.

See what Federal Reserve Chair Jerome Powell said in his press conference following the decision here.

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Understanding the Federal Open Market Committee (FOMC)

The Federal Open Market Committee (FOMC) is the monetary policymaking body of the Federal Reserve System. It plays a crucial role in shaping the U.S. economy by influencing credit conditions and interest rates. Understanding the FOMC’s structure, functions, and impact is essential for investors, economists, and anyone interested in the financial markets.

What is the FOMC?

The FOMC is comprised of twelve members:

• The seven members of the Board of governors of the Federal Reserve System.
• The president of the federal Reserve Bank of New York.
• Four of the remaining eleven Federal Reserve bank presidents, serving on a rotating basis.

The FOMC meets eight times per year to discuss the state of the economy and determine the appropriate course of monetary policy. Five of the twelve voting members are permanent, while the remaining seven rotate annually, ensuring depiction from across the Federal Reserve System.

Key Functions of the FOMC

The FOMC’s primary functions revolve around influencing the U.S. economy through monetary policy. These include:

• Setting the Federal Funds Rate: This is the target rate that banks charge each other for the overnight lending of reserves. Changes to this rate ripple through the economy,affecting borrowing costs for consumers and businesses.
• Open Market Operations: The FOMC directs the Federal Reserve Bank of New York to buy or sell U.S. government securities in the open market. Buying securities injects money into the banking system, lowering interest rates, while selling securities withdraws money, raising rates.
• Setting Reserve Requirements: These are the fraction of a bank’s deposits that they are required to keep in their account at the Fed or as vault cash.
• Providing Economic Forecasts: The FOMC publishes the Summary of Economic Projections (SEP) onc per quarter. The document depicts the members’ economic forecasts and their views on the appropriate federal funds rate path ahead.

How Dose the FOMC Impact the Economy?

The FOMC’s decisions have a significant impact on various aspects of the economy:

• Inflation: Raising interest rates can help curb inflation by reducing demand, while lowering rates can stimulate economic activity and potentially increase inflation.
• Employment: Lower interest rates can encourage businesses to invest and hire, boosting employment.Higher rates can slow economic growth and potentially lead to job losses.
• Economic Growth: The FOMC aims to foster lasting economic growth by maintaining stable prices and full employment.
• Financial Markets: FOMC announcements and policy changes can considerably impact stock prices, bond yields, and currency exchange rates.

inside the FOMC Meetings

FOMC meetings are closely watched by financial markets. The process involves:

1. Economic Briefings: The FOMC receives presentations from Federal Reserve staff on current economic conditions.
2. Discussion and Debate: Members discuss their views on the economy and potential policy options.
3. Voting: Members vote on policy decisions, such as changes to the federal funds rate.
4. Communication: The FOMC releases a statement after each meeting outlining its decisions and rationale.

Want to know more about what happens behind closed doors at the FOMC meetings? Investopedia interviewed former members and reviewed meeting minutes and transcripts to find out. Read about it here.

Key Takeaways

• The FOMC is the primary monetary policymaking body in the U.S.
• It consists of the Board of governors and five rotating Reserve
  

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