The Federal Reserve delivered another quarter-point rate cut, but the message from Jerome Powell was clear. The path ahead is uncertain, and the Fed is now split over how to balance rising unemployment risks with inflation that is still above target. Powell said the labor market has weakened more than the official data shows, in part because the government shutdown delayed key reports and distorted others.
At the same time, the Fed announced a major operational shift. It will begin buying $40 billion in Treasury bills in the first month to maintain ample reserves and ease pressure in money markets. Powell stressed this is not QE, but it does expand the balance sheet at a moment when funding strains are emerging.
In this announcement, Powell addresses tariffs pushing goods inflation higher, negative underlying job growth, a divided FOMC, and why the Fed is now “well positioned to wait and see” before considering additional moves.
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