Bloomberg reported that the lack of significant market reaction to the Federal Reserve's decision is not surprising, adding that traders may wait for more details from the Fed's discussions before adjusting their positions.

Key points from the FOMC statement include:

Main Summary of the Fed's Decision

1) Rate Cut of 25 Basis Points

• The Fed voted 9 to 3 in favor of a 25 basis point cut.
• New range: 3.5% – 3.75%

2) Dot Plot

• Officials expect:
  • Only one cut of 25 basis points in 2026
  • Another 25 basis points cut in 2027
• Same September forecasts unchanged.

3) Economic Forecasts

• Inflation by the end of 2026: 2.4% (down from 2.6% previously).
• GDP Growth: 2.3% (up from 1.8% previously).

4) Start of Short-Term Bond Purchases

Starting from December 12, the Fed will begin purchasing short-term Treasury securities to ensure ample reserve levels, having observed that reserve balances have fallen to “adequate” levels.

Committee Disagreements

The decision faced three dissenting votes:

• Stephen Miran (Board member): Wanted a 50 basis point cut.
• Jeff Schmad (Kansas City) and Austan Goolsbee (Chicago): Wanted to keep rates unchanged.

This division reflects uncertainty about the pace of economic slowdown and the speed at which interest rate cuts may return.

5) Statement Language Adjustment

The Fed introduced a new phrase indicating it will consider:

“The extent and timing of any further adjustments” to interest rates

This implies a possibility of pausing before any new cuts or moving more slowly.

6) Fed's Economic Assessment

• Labor Market:
  • “The pace of job creation has slowed this year”
  • “Risks of employment decline have increased in recent months”
• Macroeconomic:
  • Available data indicates that economic activity is expanding at a moderate pace.
  • Inflation has risen compared to earlier this year and remains relatively high.

Quick Summary

• The Fed cut rates as expected.
• Forecasts for 2026 and 2027 remain unchanged: two cuts of 25 basis points each year.
• Inflation is slowly declining, while growth is rising.
• The division within the committee reveals disagreements over the speed of easing.
• Markets await Powell's conference to determine the next direction.