The Federal Reserve cut interest rates by 25 basis points as expected and announced the end of balance sheet reduction starting December 1 (to avoid a repeat of the 2019 "money crunch" amid current liquidity tightening). The market had already priced this in fully, with more focus on the subsequent rate cut path.
The meeting was hawkish. Powell said that the Fed's internal divisions over whether to continue cutting rates in December have widened, with more people thinking it might be better to wait. The market reacted sharply, with U.S. Treasury yields rising nearly 10 basis points, the dollar also surging, and U.S. stocks and gold adjusting.After two consecutive rate cuts in September and October, interest rates have been adjusted to deal with "known" employment pressures, but the government shutdown cannot provide more new economic information, so Powell is worried that "flying blind" too fast will backfire. So from this point of view, the Fed seems to have reason and motivation to pause rate cuts in December and observe subsequent changes.In the short term, the impact of the government shutdown is expected to frustrate the market's continued "easy trade."The copyright of this article belongs to the original author/organization.
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