Fed Faces a ‘Challenging Situation’ Powell Says

Powell: Fed’s Split Risk Makes Policy Moving Forward Tricky

11 minutes ago

One reason for the disparate predictions among Fed officials is the tension between a risk of higher unemployment and stubborn inflation.

“So we have a situation where we have two-sided risk, and that means there’s no risk-free path,” Powell said at his press conference. “It’s not at all surprising to me that you have a range of views. It’s not so much about having different views for the path of the economy; it’s also partly about what’s the right thing to do in light of this tension between the two goals.”

Fed officials feel differently about the path ahead because they weigh the dual mandate differently, he said.

“It would actually be surprising if you didn’t have a pretty wide range of views in this kind of highly unusual situation,” he said.

Fed Officials Split on Future Rates Isn’t Unusual, Powell Says

17 minutes ago

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 should 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 they 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

29 minutes ago

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 could keep interest rates high to discourage spending and fight inflation, or lower them to boost the economy and encourage hiring. However, it can’t do both simultaneously.

“When our goals are in tension like this, our framework calls for us to balance both sides of our dual mandate, with downside risk to employment having increased, the balance of risks has shifted accordingly,” Powell said.

Federal Reserve Chair Jerome Powell Starts Press Conference

39 minutes ago

Federal Reserve Chair Jerome Powell kicked off his press conference by summarizing today’s announcement and talking about economic conditions.

You can watch the press conference live here.

Committee Members See a Stable Economy Ahead

45 minutes ago

Fed officials see the economy generally staying stable in the years ahead. They expect real GDP to grow by 1.6% this year, up from an earlier projection of 1.4%, and speeding up a bit to 1.8% in 2026.

They aren’t forecasting big changes in the labor market either, with a projected unemployment rate of 4.5% this year and 4.4% 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

48 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 Eyes Two More Cuts This Year and One in 2026

57 minutes ago

Fed officials are penciling in two cuts for the remainder of the year and one more in the next year, according to quarterly projections from the Federal Open Market Committee. 

The median Fed official expects their benchmark rate to finish the year around 3.6%, suggesting two more 25-basis-point cuts or a jumbo 50-point cut may happen this year. Their most recent round of projections, released in June, suggested Fed officials had been eyeing one more rate cut this year.

Markets also anticipate the Fed to keep easing next year, but officials’ projections didn’t go so far. The median projection has the Fed cutting rates to around 3.4% next year, suggesting only one more cut in 2026.

-Polo Rocha

Fed Cites Weakening Jobs Market As Reason For Cut

1 hr 6 min ago

In its statement describing its decision, the Fed cited the weakening jobs market as one reason for cutting rates. 

The committee changed the language of its announcement to read, “Job gains have slowed, and the unemployment rate has edged up but remains low.”

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

Fed Cuts Key Interest Rate For First Time Since December

1 hr 9 min ago

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 since 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.

Read more about the interest rate decision here.

-Diccon Hyatt

So What Should We Expect From the Dot Plot?

1 hr 23 min ago

The dot plot could reveal whether officials lean toward cutting rates in the FOMC’s subsequent two meetings. Fed officials will also update their dots for 2026, indicating how many more follow-up cuts they foresee.

Financial markets “are overly optimistic about the number of cuts in 2025,” wrote Oxford Economics’ Chief U.S. Economist Ryan Sweet.

Investors expect 75 basis points in cuts by year-end and 75 more in 2026, Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, wrote in a note to clients. The FOMC is unlikely to “validate those expectations” when its forecasts are published, Tombs wrote.

-Polo Rocha

What is the Dot Plot? How Do You Read It?

1 hr 32 min ago

The dot plot is a part of the economic projections released four times a year during every other FOMC meeting.

The dots give an anonymous snapshot of where the 9 Fed governors and regional bank presidents project the fed funds rates will be in the future. A median result of these dots will give investors an overall projection of the federal fund rate’s path, though some have questioned whether it’s effective.

The Fed’s economic projections are made based on current conditions and available information. 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

Dissents Could Show a Committee Divided

1 hr 49 min ago

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.

If Trump’s new appointee Stephen Miran follows suit, it could lead to an unusually divided FOMC meeting.

“If these three Governors dissent, it would be the first meeting with three dissents from the Board of Governors since 1988,” Deutsche Bank Chief U.S. Economist Matthew Luzzetti wrote in a research note.

A couple of regional bank presidents could also vote to keep interest rates unchanged, further dividing the FOMC. Deutsche Bank analysts said public comments from Kansas City Fed President Jeffrey Schmid or Chicago President Austan Goolsbee indicate they would be the committee members most likely to vote for no change. 

“In theory, it’s not impossible we have three Governors dissent, and five total dissenters on the FOMC, which would be remarkable versus history,” wrote Deutsche Bank’s Jim Reid. “In reality, maybe there will be three dissenters across the whole committee.”

-Polo Rocha and Taylor Tompkins

What the Fed’s Interest Rate Decision Could Mean for the Stock Market

2 hr 8 min ago

Wall Street is pretty confident that stock market will get a boost from a rate cut on Wednesday.

Traders expect the S&P 500 to move about 0.6% in either direction on today, according to options pricing data. That would be the S&P 500’s biggest post-Fed-Meeting move since March, when the benchmark index finished up 1.1% after policymakers left their full-year interest rate forecasts despite increasing economic uncertainty. 

The Federal Reserve is widely expected to cut rates for the first time this year, with federal funds futures trading data putting the odds of a 25 basis point cut at about 94% Wednesday morning. Traders see a 6% chance the Fed lowers rates by 50 bps, the same amount with which it kicked off last year’s rate-cutting cycle in September.

Read more about market expectations ahead of the meeting here.

-Colin Laidley

Trump is Looking for a Massive Rate Cut

2 hr 31 min ago

While the Federal Reserve is widely expected to cut the fed funds rate Wednesday, it will likely be a fraction of President Donald Trump’s proposed reduction.

On Monday, President Donald Trump renewed demands for the central bank to significantly cut the fed funds rate in a social media post.

The Fed has held interest rates high enough to restrict the economy all year out of concern that Trump’s tariffs will fuel inflation. Trump has needled the Fed to lower rates, nicknaming Fed Chair Jerome Powell “Too Late” for his cautious approach.

In a social media post on Monday morning, Trump said the rate cuts Fed officials are considering aren’t steep enough.”‘Too Late’ must cut interest rates now, and bigger than he had in mind,” Trump wrote.

Trump is likely advocating for a much larger cut. In July, Trump said the fed funds rate was “at least” three percentage points too high.

Read more about Trump’s rate cut expectations here.

Investors See a 96% Chance of a Quarter-Point Cut

2 hr 58 min ago

Financial markets are pricing in a 96% chance the Federal Open Market Committee will reduce the fed funds rate by a quarter point, according to the CME Group’s FedWatch tool. The tool forecasts rate movements based on fed funds futures trading data.

There’s a 4% chance that the Fed will choose to do a half-point cut, which would be a rare move for the committee.

What Happened at the Last Fed Meeting?

3 hr 51 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.

How Does the Federal Reserve Work?

4 hr 46 min ago

The Federal Open Market Committee (FOMC) is the monetary policy-making body of the Federal Reserve System, the United States’s central bank. It holds eight regularly scheduled closed meetings each year, one of which is today.

The FOMC consists of 12 members: the seven board governors, the Federal Reserve Bank of New York president, and four other regional bank presidents who serve rotating one-year terms.

At each FOMC meeting, the committee members discuss economic and financial conditions and make decisions about monetary policy based on the dual mandate of keeping employment high and inflation low. The FOMC issues a public statement about its decisions after each meeting, and the chair typically hosts a press conference to discuss the decision further after each meeting.

The FOMC also publishes the Summary of Economic Projections (SEP) once per quarter. The document depicts the members’ economic forecasts and their views on the appropriate federal funds rate path ahead.

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.

Markets Prepare For What Is Shaping Up to Be an Intriguing Fed Meeting

5 hr 10 min ago

The Dow Jones Industrial Average and the S&P 500 opened higher this morning and the 10-year Treasury yield ticked down early Wednesday, as investors prepare for an extraordinary Fed meeting.

While a rate cut is widely expected, several factors are drawing attention to this month’s Fed meeting:

• The Fed’s summary of economic projections will detail how the policy committee expects to proceed in the coming months. It’s a snapshot in time, but it could include more cuts than were expected last.
• The summary of economic projections and the number of dissents to the Fed’s interest rate decision could show that divisions are growing within the central bank. There were two dissents at the last meeting, as a pair of governors called for a rate cut at that time.
• The lineup of the Fed voters will also be scrutinized. Stephen Miran was installed as the newest Fed governor just before the meeting started Tuesday. The latest decision in the legal battle between Lisa Cook and President Donald Trump was delivered late Monday, allowing her to keep her position as a lawsuit moves forward.

To read more about how markets are moving ahead of the meeting, click here.

To read more about the extraordinary nature of today’s meeting, click here