US | Fed set to pause after today’s third “risk-management” cut

Summary

Unless the labor market weakens more decisively or tariff-driven price pressures fade faster than expected, the FOMC is likely to remain on hold in January and adopt a more patient, data-dependent posture thereafter.

Key points

• Key points:
• As widely expected, the FOMC delivered a third consecutive 25bp rate cut, lowering the target range to 3.50-3.75% amid deepening divisions within the Committee.
• The dot plot revealed a cluster of soft dissents, showing that four non-voting participants would have aligned with Goolsbee and Schmid in favor of a pause.
• In his press conference, Chair Powell delivered a clear signal that the Committee is likely to pause at its next meeting in late January.
• After 75bp of easing this year and 175bp since the first cut in September of last year, the Fed is now “well positioned to wait to see how the economy evolves.”
• We believe the Fed will take some time to assess the effects of the easing delivered so far before proceeding with two additional rate cuts in the second half of 2026.

Geographies

Topics

Tags