Why the Market Is Falling Even After a 25 bps Rate Cut

RATE CUTS 25 BPS THEN WHY MARKET FALLING?

Powell’s December Warning Exposes Hardening Divisions at Fed

Federal Reserve Chair Jerome Powell’s blunt warning that investors need to rein in expectations for a December interest-rate cut underscored a growing tug-of-war among US policymakers who are opposed in their outlooks for jobs and inflation.

While Powell made it clear that the primary concern for some is a cooling job market, others inside the Fed are warning persistent inflation will limit room for more easing. And a freeze on the release of official economic data during the ongoing government shutdown is only hardening the divide.

Powell’s comments came after the Federal Open Market Committee voted 10-2 to lower the target range for the federal funds rate by a quarter percentage point, to 3.75%-4%. It was the second straight rate cut, but for the first time in six years, there were dissents in both directions — with one official advocating a larger reduction and another preferring to stay on hold.

Fed Chair Powell Says December Interest Rate Cut Is ‘Far From’ Guaranteed

The Federal Reserve's policy committee won't necessarily cut interest rates in December, contrary to what financial markets had expected.

Federal Reserve Chair Jerome Powell upended financial market bets that the Fed's policy committee would lower its benchmark interest rate for a third consecutive meeting in December.
 Speaking at a press conference following the Fed's decision to cut rates by a quarter-point on Wednesday, Powell said that the rate-cutting campaign would not necessarily continue into December, as had been widely forecast.

"A further reduction in the policy rate at the December meeting is not a foregone conclusion, far from it," Powell said. "There were strongly different views today. And the takeaway from that is that we haven't made a decision about December."

In Short:

Even though a *25 bps rate cut* sounds positive, markets fell because:

* It was already priced in

* Investors wanted deeper cuts

* Economic data remains weak

* Bond yields and the dollar are strong

* Traders booked profits

In finance, what matters isn’t what happens — it’s what people expected to happen.”