US | Fed cuts rates, ends QT, and signals it may pause in December

Summary

Before the meeting, we already saw scope for fewer cuts than the three currently penciled in for 2026. Following today’s meeting, we now hold a stronger bias toward fewer rate cuts ahead.

Key points

• Key points:
• As widely expected, the FOMC delivered a second consecutive 25bp rate cut, lowering the target range to 3.75-4.00%, amid continued divisions within the Committee.
• While it was no surprise that Miran dissented in favor of a 50bp cut, the Kansas Fed president expressed a more hawkish view and voted against the move.
• In his press conference, Chair Powell struck a cautious tone, warning that a rate cut in December was not a “foregone conclusion” and, in fact, was “far from it.”
• Financial markets swiftly adjusted to the Fed’s cautious messaging, scaling back easing bets while the Fed continues to rely on alternative labor market data.
• The bar for further easing has been raised; unless alternative data signal a material weakening in the labor market, the Fed will likely move to the sidelines in December.

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