The federal reserve reduced interest rates by a quarter of a percentage point on Wednesday, which led to the long -awaited reduction in Powell. Glimpse Last month and President Donald Trump He was chasing him Because since he took office.
The decision, such as the decision taken at the meeting last month, was not unanimously supported. Stephen Miran’s voice, Trump’s choice to join the Federal Reserve, in favor of reducing half a point.
The first reduction since December, the decision permeates increasing concerns about the labor market, which has slowed down and the charged and unusual policy surrounding the Central Bank.
Investors and economists extensively expected this transformation, which decreases the price of the standard that decreases by 25 basis points. Wall Street was already priced in a state of pieces, as future contract markets were set a little opportunity to move half a larger point.
“This is the beginning of the cutting cycle,” Chris Bragati, chief investment official in SWBC, He said CNN. “The federal reserve is pivotal from the motivational policy to the image of refrigeration.”
Most Federal Reserve officials expect the Federal Reserve to reduce interest rates by half a percentage this year, which means that each of the remaining two meetings will witness a reduction in a quarter of a point. However, seven of 19 governors expected less cuts this year, indicating some division for the winter.
Jobs on the edge of the abyss
The reduction of the federal reserve rate does not necessarily reflect a victory over inflation, which remained StubbornOr that the economy has completely survived The storm of tariffs. Instead, it comes amid increasing evidence on the cooling function market that risk slipping towards the frank stagnation.
Modern data raised red flags: in AugustThe United States added only about 22,000 jobs, a sharp decrease from the previous months, with an increase in the unemployment rate to 4.3 %, which is the highest since 2021.
Economists like Mark Zandy even have them Proposal The United States may already slip into “stagnation of jobs”, given the constantly weak work gains. The trend decreased during the summer: The average monthly job growth for the three months ending in July was only about 28,000, compared to about 196,000 per month earlier in the year.
MOODY Analysis Model now Appoint Nearly 50 % chance of stagnation in the next 12 months, reflecting the amount of weight that federal reserve officials put on these worsening work standards.
The remainder is inconceivable whether the lowering a 25-year-old average is the beginning of a full reduction cycle-where the markets are graduated-or just a single time modification. Labor reports in the main future, such as a salary report or unanimous Jolts in September, will help in determining this. In an environment, Trump is constantly threatening the independence of the Federal Reserve, Powell is under pressure by the markets to show that the decisions are necessarily driven by economic, not politics.
Political background
The decision comes at a time when President Donald Trump continues unusual pressure on the central bank. Trump brilliantly, Federal Reserve Chairman Jerome Powell for several months, tried – In vain – To overthrow the ruler Lisa Cook, and this week, his economic advisor, Stephen Miran, saw the constitutional oath as the ruler of the Federal Reserve.
“This is not a natural moment, because Trump is a kind of beauty competition for the Federal Reserve Chair.” He said Wall Street Journal. Powell’s term ends in May, and the battle of the caliphate has already spill in politics discussions.
Loreta Master, former Federal Reserve Chairman in Cleveland, to caution Political tremors risk “undermining the institution” through the lack of clarity in the separation of politics and partisan loyalty tests.
Markets
Some merchants are already under the possibility of reducing “knee” half a point before the end of the year. Bloomberg data He appears The increasing bets on up to 70 basis points of mitigation by December.
“Markets like discounts in prices that are considered luxury, not an emergency,” He said CNN. “As long as the Federal Reserve offers this as a proactive, as the risk of stagnation continues, the shares background is still constructive.”
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