By: Aaron Wall, CFA
Partner, Portfolio Manager
The Federal Reserve met on Wednesday and resumed cutting interest rates, making its first 0.25% cut since December of last year. Given the recent jawboning between the Trump administration and the Fed, this was a difficult needle for Chairman Powell to thread (see last week’s edition for more background).
The labor market was front and center at the Fed’s September meeting. As we’ve discussed over the last several weeks, it has appeared to soften since the last Fed meeting in July. The Federal Open Market Committee’s September statement referenced this by saying, “The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment have risen.”
According to fed funds futures, the market remains optimistic that there will be continued rate cuts through the rest of 2025 and into 2026.
In addition to the rate cut, we were also watching the number of dissenting votes. Last meeting, two governors dissented to the decision to keep rates unchanged, favoring a 0.25% cut.
There were two ways to look at these dissents. The first, albeit pessimistic, view is that they were dissenting to curry favor with President Trump. The second view is that their arguments were on solid footing and that the labor market was in fact weaker than the data in July was suggesting.
There was one dissent this meeting that came from the newest member of the committee (and recent nominee from the President) Stephen Miran. He dissented in favor of a 0.50% cut.
This was not unexpected and absolutely leans towards the first view mentioned above. Fed independence will remain a focus for us as we head into the remainder of the year.
