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Penultimate 2025 FOMC Move ?3

15:43 29-Oct-25

Although the statement linked below indicates that risks have shifted to the downside, Powell led his prepared remarks by saying that it has "not shifted much" since the last meeting in September.

Goods prices are increasing due to tariffs, but Powell characterizes them as most likely a one off event, with the implication that the Fed will not seek to correct that.  He then went on to acknowledge the K-shaped economy, with some households stressed, but stopped short analyzing any real-world effects from that.  This exemplifies how the Fed's inflation target and modus operandi in pursuing it is misguided, since never correcting the constant inflationary overshoots results in a long run rate that is a multiple of the Fed's 2% target.

It was acknowledged that job creation is close to zero and the BLS over-counts.  Rising defaults in sub-prime credit, especially in auto loans, were also acknowledged, but not currently deemed to be of systemic importance.  What was not discussed is home offering prices, which CrowdWisers spot checks see faltering even in the most stable regions.

The Federal shutdown may obstruct such data filtering into Fed decisions while it lasts, despite Powell referencing state level data.  FedWatch still puts the chances of a December cut below 90%, down from above 95% earlier in the month.  This service will remain value-oriented rather than trying to time the market, and it is of the opinion that value is steadily eroding even though stock prices may continue to climb overall for a while yet.

The Fed has decided to cut rates by another quarter point, which is surprising to about nobody.  It is also ceasing the reduction of its balance sheet as of December 1st as it judges that the balance of risks has shifted to the downside.

The press conference is at 2:30, and this service will follow up if appropriate.

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