The Federal Reserve (Fed) has lowered its benchmark interest rate by 25 basis points to a range of 3.75% – 4.00%, marking the second consecutive rate cut and aligning with market expectations. However, this decision sparked debate within the Fed board as two members voted against the move, reflecting growing tensions among policymakers. In his post-decision speech, Chair Jerome Powell provided insight into the current economic landscape. Key takeaways include: 1) The labor market remains resilient, but cooling down gradually, 2) Inflation remains stubbornly high and shows little sign of abating. 3) The economy is showing signs of continued growth despite a potential impact from the recent government shutdown. 4) Layoffs remain minimal, and hiring activity hasn’t picked up significantly. 5) A temporary slowdown in economic activity is expected due to the government shutdown but its long-term effects are unclear. 6) Downside risks to employment have increased. 7) Inflation expectations are rising, even though most long-term inflation expectations remain aligned with the Fed’s target of 2%. 8) High customs duties are impacting prices, particularly for certain goods. This press conference comes as FOMC member Jeffrey Schmid voted against the rate cut, stating it was premature, while Stephen Miran argued for a more aggressive 50 basis point move. The decision to reduce quantitative tightening on its balance sheet begins December 1st with the elimination of Treasury bond holdings at $5 billion monthly and mortgage-backed securities (MBS) by $35 billion. The Fed will reinvest MBS redemptions into short-term treasury bonds after this date. 8) Notably, the decision indicated continued economic expansion at a moderate pace, albeit with slowing employment growth and a slight increase in unemployment rate. 9) The Committee reiterated its commitment to achieving maximum employment and keeping inflation at 2%, while acknowledging uncertainties surrounding the economy remain high, and downside risks to employment have increased in recent months.