Fed Cuts Rates Again as Growth Slows and Inflation Eases—But Powell Pumps Brakes on December Move
Wall Street woke up to another quarter-point cut Wednesday, yet Jerome Powell just slammed the “auto-pilot” button. With Q3 GDP nowcasting at 3.9%, CPI cooling to 3.0%, and unemployment steady at 4.3%, the Fed is easing—but not blindly.
Fed rate cuts 2025 and US inflation easing dominate searches as Powell December rate cut doubts spike alongside Q3 GDP slowdown and core CPI 3%. The central bank’s second straight trim drops the target to 3.75-4.00%, yet Powell warned: “December is NOT a done deal.”
The U.S. economy is decelerating gracefully. Atlanta Fed’s GDPNow pegs Q3 at 3.9% annualized—still robust, but down from Q2’s 3.8% and miles from 2024’s 2.8% pace. Consumer spending held firm, yet trade tensions and higher-for-longer rates earlier this year shaved momentum. Philadelphia Fed forecasters see just 1.3% for Q3, highlighting the split-screen outlook.
Inflation is finally behaving. September CPI printed +0.3% month-on-month, pushing the year-over-year rate to exactly 3.0%—below the 3.1% feared and the lowest since January. Core CPI (ex-food & energy) rose a tame +0.2%, landing at 3.0% y/y. Shelter costs cooled to +0.2%, gasoline jumped but energy remains contained. PCE, the Fed’s favorite gauge, is estimated at 2.9% core—inches from the 2% target.
Powell’s presser delivered the headline shock:
“A further reduction in December is NOT a foregone conclusion—far from it.”
Two dissents underlined the divide:
- One hawk wanted no cut.
- One dove demanded 50 bps.
CME FedWatch instantly slashed December odds from 98% to 64%. Markets now price only one more 25 bps move by March 2026.
Why the caution?
- Tariffs could re-ignite prices.
- Government shutdown has frozen October CPI & jobs data—Powell called it “driving in fog.”
- Labor market cracks: payrolls averaged 132k last quarter, unemployment 4.3%, but downside risks have risen.
What it means for YOU
- Mortgages: 30-year fixed dipped to 6.6%—lock now before December drama.
- Stocks: S&P 500 erased gains on Powell’s tone; Nasdaq shed 1.2%.
- 401(k)s: lower rates boost bonds, but inflation watch keeps cash on sidelines.
- Small businesses: cheaper loans, but tariff fears cloud 2026 budgets.
Bottom line
The Fed is cutting, but not sprinting. Growth is slowing, inflation easing, and December is a coin-flip. If October data ever arrives, another cut is back on. Until then, cash is king.
By Sam Michael
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