Ed Lis’ Post

The Federal Reserve implemented its anticipated quarter-point rate cut, bringing the total reductions for the year to 100 basis points. While signaling a cautious stance moving forward, projections suggest fewer cuts in 2025 and inflation remaining above the 2% target until at least 2027. Jerome Powell acknowledged persistent challenges, noting that borrowing costs for mortgages and credit cards continue to rise despite the FED’s policy actions. This underscores a growing disconnect between monetary policy and tangible economic outcomes, as fiscal dominance and bond market dynamics increasingly drive the economy. As the U.S. shifts from an inflationary boom to an inflationary bust, historical trends indicate that rate cuts alone are insufficient to avert economic downturns. Key indicators, such as the S&P 500 to WTI ratio, point toward an inevitable contraction, with gold emerging as a reliable hedge against reflationary pressures. Investors should reconsider portfolio strategies to prioritize assets resilient to economic turbulence. The FED’s optimistic narrative on inflation appears premature, as markets face the looming reality of a business cycle downturn beyond the reach of central bank intervention. In summary, while Wednesday’s market decline was significant, the real impact may be felt Friday, with Thursday offering the typical short-lived rebound. https://lnkd.in/d2DzKVqF

11 Details About the Federal Reserve Cutting Interest Rates Again summarize Here are 11 key details about the Federal Reserve's recent interest rate cut: Rate Cut Amount: The Fed cut its benchmark interest rate by 0.25 percentage points. New Rate Range: The new federal funds rate range is 4.5% to 4.75%. Second Cut in 2024: This is the second rate cut this year, following a 0.50 percentage point cut in September. Reason for Cut: The decision was driven by cooling inflation and the need to support economic growth. Unanimous Decision: The rate cut was approved unanimously by the Federal Open Market Committee (FOMC). Impact on Borrowing Costs: The rate cut is expected to lower borrowing costs for consumers and businesses. Economic Conditions: The Fed noted that labor market conditions have eased and the unemployment rate has increased slightly but remains low. Inflation Progress: Inflation has made progress toward the Fed's 2% target but remains somewhat elevated. Future Cuts Expected: Analysts predict further rate cuts at the Fed's December meeting and into 2025. Market Reaction: The stock market responded positively to the rate cut, with the Nasdaq and S&P 500 closing at record highs. Political Context: The rate cut comes just days after the presidential election, but the Fed has stated that its decisions are based on economic data rather than political developments.

This Wednesday, the Federal Reserve is expected to cut interest rates for the first time in four years, potentially reducing the range from 5.25%-5.5% to 5.0%-5.25%. This move signals the end of an aggressive inflation-fighting campaign and the start of a new era of lower rates projected to continue into 2025 and 2026. Investors are anticipating a 60% chance of a 50-basis-point cut, but opinions vary on the pace and magnitude of future reductions. Fed officials will provide updated projections for interest rates and the economic outlook. The anticipated rate cuts are expected to make borrowing cheaper for consumers and businesses alike, potentially boosting spending and investment. The Fed's decision will also come ahead of the presidential election, with some political figures urging caution on rate changes before the vote. As inflation continues to trend downward and the labor market shows signs of cooling, the Fed’s focus will shift towards supporting job growth while maintaining price stability.

🔍 Fed's Path Forward: Rate Cuts, the Economy, and the Trump Effect As the Federal Reserve prepares for its final policy meeting of the year on Dec. 17-18, markets are laser-focused on whether the central bank will continue its path of reducing interest rates. With the release of the November meeting minutes, a clearer picture may emerge of the internal debates shaping monetary policy as the Trump administration prepares for its return. Fed Chair Jerome Powell highlighted the resilience of the U.S. economy during the November meeting, citing strong growth, a robust labor market, and signs of cooling inflation. Despite an October dip in job growth, Powell emphasized a “neutral stance” for monetary policy, signaling a cautious approach to further rate cuts. Market expectations for a December rate cut have slipped, with probabilities hovering around 53%, as investors weigh the potential economic impact of Donald Trump’s policy agenda, which includes: - Tax cuts: Stimulating growth but possibly increasing inflation. - Immigration restrictions: Potentially tightening the labor market. - Higher tariffs: Amplifying wage and price pressures. - Fed Governor Michelle Bowman noted last week that while inflation progress has been notable since early 2023, recent months have seen a stall in improvement. This “neutral stance” could mean fewer rate cuts in 2025, as investors now forecast rates stabilizing at around 3.9%, well above earlier projections. With the Fed walking a tightrope between supporting growth and containing inflation, the November meeting minutes will offer valuable insights into how policymakers are navigating these crosscurrents. The fallout from Trump’s proposed policies—ranging from heightened inflation risks to wage pressures—adds another layer of complexity to an already delicate balancing act. As the S&P 500 and Dow hit record highs, buoyed by optimism in technology stocks, the Fed’s next steps could set the tone for both markets and the broader economy heading into 2025. #FederalReserve #InterestRates #EconomicOutlook #MonetaryPolicy #InflationRisk #USEconomy #TrumpAdministration #RateCuts #InvestmentStrategy https://lnkd.in/dTqm_C7g

Federal Reserve officials expressed confidence that inflation is easing …, allowing for further interest rate cuts albeit at a gradual pace, …. The meeting summary contained multiple statements indicating that officials are comfortable with the pace of inflation, even though by most measures it remains above the Fed’s 2% goal. -> So maybe further rate cuts come very slow or not at all…

The Federal Reserve cut its target interest rate by a quarter percentage point Wednesday, while releasing new projections that signal less rate-cutting is on the way in 2025 than envisioned three months ago. Why it matters: The Fed is entering a more cautious phase after cutting rates for three straight meetings, reflecting sluggish progress in bringing inflation down. Driving the news: The policy-setting Federal Open Market Committee reduced the target range for the federal funds rate to between 4.25% and 4.5%, which makes for a full percentage point reduction in the target since rate cuts began in September. However, in September, the median top Fed official projected it would be appropriate to cut rates to 3.4% by the end of 2025. Now, that median projection is 3.9%. That implies only two rate cuts ahead next year, not the four signaled by previous projections. Fourteen of 19 top Fed leaders believe two or fewer rate cuts are likely to be justified in 2025. By the numbers: The officials also bumped up their projections for GDP and inflation, reflecting the evolution of economic data since September The median official now expects 2.5% growth for 2024, up from 2% in September. But the officials now expect core inflation to be 2.8% for the year, higher than the 2.6% projected three months ago. The officials also increased their 2025 and 2026 inflation projections, now seeing 2.5% inflation next year (up from 2.1% in September). What they're saying: "In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks," the FOMC said in a statement. https://lnkd.in/gEJauA-H