The Fed Cut Again, Then Basically Told Markets To Not Get Used To It

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Here’s what happened: the Fed cut the policy rate by another quarter point to a 3.5%–3.75% range, the lowest in three years. On paper that’s more relief for borrowers and one more nudge away from the higher for longer era. In reality, this was one of the most divided meetings in years: it was a 9–3 vote, with two officials saying no cut at all and one saying go bigger.

Powell’s solution was classic cut-and-cap. He backed the doves on doing a little more now, arguing the labor market has cooled enough that you want some insurance in place before unemployment really jumps. At the same time, the post-meeting statement and forecasts basically said, “Don’t price in a whole parade of cuts from here.” Most officials see at most one more move next year, and a decent chunk didn’t even want this one.

On the inflation side, the Fed is stuck in the uncomfortable middle. Price pressures have stopped falling toward 2%, but they also haven’t exploded higher. Hawks worry that with inflation still around 3%, rates might no longer be restrictive enough. Doves look at a softer job market, higher jobless rate, and weaker hiring and say the bigger risk is breaking the labor market and having to clean up a real mess later. That split is why you got three dissents and such careful language about waiting and seeing from here.

Behind the scenes, the Fed also quietly turned the balance-sheet tap back on. They’ll buy around $40 billion in short-term Treasuries this month, not as a stimulus blast, but to ease strains in overnight lending markets that grease the whole financial system. Think of it as topping up the oil in the engine, not flooring the gas pedal. That should help keep short-term funding rates from spiking in weird year-end moments.

And while the politics around the next Fed chair are getting louder, the current board just unanimously reappointed most of the regional Fed presidents for new terms. That’s a small but important signal that, for now, the plumbing of Fed governance is intact even as the top job becomes a campaign talking point.

Net-net, you’re in a lower but not low rate world, with a Fed that’s done most of the easy cuts and now wants the data to do the talking.

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Actionable Stuff

• Plan for one-and-maybe. Assume this cut plus maybe one more over the next year, not a full-blown easing cycle.

• Lean into quality yield. As cash rates drift down, solid dividends and coupons from real businesses get more attractive.

• Avoid the rate junkies. If a stock only works in a massive, fast-cut scenario, it’s probably mis-priced for this new wait and see Fed.

• Favor balance-sheet grown-ups. Slower growth + choppy data = time to back lenders and landlords who already stress-test the bad stuff.

• Borrowers: use the window. If you can refinance or lock something in at a meaningfully better rate, don’t assume tomorrow’s always cheaper.

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*Past performance is no guarantee of future results. Investing involves risk. This material does not constitute investment, legal, accounting, or tax advice. Zacks Investment Research is not a licensed dealer, broker, or investment adviser.

Bottom Line

This cut was less pivot party and more final slice…for now. The Fed eased again to insure against a weaker job market, hinted it’s near neutral, and quietly turned the balance-sheet hose back on to keep funding markets calm, all while flashing a big data dependent sign about 2026.

Your game plan should match that tone. Build around businesses that can live with slightly lower rates, slower growth, and more political noise without needing a rescue. Let everyone else yell about whether the Fed is too dovish or too hawkish. You’re here to own balance-sheet quality, durable cash flows, and yield that doesn’t disappear if this really was the last cookie in the jar for a while.