Wall Street's reaction to the Fed's rate decision

The Federal Reserve lowered its key rate by 25 bps to a range of 4-4.25%, indicating the possibility of two more cuts in October and December. 

Jerome Powell called this decision «risk management» against the background of a weakening labor market with continued inflationary pressures. According to the updated dot plot, the Fed expects another 0.5 percentage points of reduction before the end of 2025 and one in 2026.

Not everyone supported the decision: Trump's nominee to the FOMC, Stephen Miran, voted for a sharper 50bp cut. The president himself had previously demanded more aggressive easing. Powell, in response to questions about independence, stressed that the Fed is guided solely by economic data.

Analysts' comments:

• Goldman Sachs: The decline was the beginning of a series, the rhetoric is dovish.

• Barclays: The median point is misleading, the consensus in the committee remains shaky.

• Morgan Stanley: The risks of falling employment with high inflation are recognized, the forecast is moderately hawkish.

• BofA: The market perceived the meeting as a «hawkish decline,» but expectations shifted towards a softer policy.

• Capital Economics: Treasury bond yields will rise, the dollar will strengthen.

• Vital Knowledge: Employment risks have increased, but inflation expectations remain stable.

• ING: The Fed expects three cuts, but the market is laying down four to support growth and employment.