Every FOMC meeting seems to feel like the most consequential one of our lifetimes. That is, until the next one. 

This most recent one was no exception. 

With President Trump’s Council of Economic Advisers chair now also a Fed governor and high hopes for a dovish central bank, expectations were elevated. Despite some intra-day volatility, it’s looking like the Fed has managed to match those dovish expectations.

 Let’s dig into some of the key takeaways.

What’s in a cut?

The much anticipated September FOMC has come to pass and as expected, the FOMC cut rates by 25bps. 

Looking through the changes to the statement, some quite dovish changes were made:

• In line with what Jerome Powell hinted at during the Jackson Hole symposium, the Fed is now more concerned about the labor market than in previous meetings, and that was the key driver for committing to cutting during this meeting.

• Concerns for inflation also rose, but it’s clear that the Fed is prioritizing the labor market despite that:

What’s especially interesting is the 50bps cut dissent from newly appointed (and previous Forward Guidance guest Governor Stephen Miran. 

Considering that Governors Waller and Bowman both dissented and opted for a 25bps cut in the July meeting, it would have been intellectually consistent for them to opt for 50bps during this meeting. The fact that Governor Miran was the only dissenter is quite surprising. 

With the September meeting being a Summary of Economic Projections (SEP) update one, we received updates on how the Fed is forecasting the trajectory of the economy and interest rates.

With the updated dot plot in hand, one of these things is certainly not like the other:

One FOMC member penciled in a federal funds rate of 2.75%! Most speculators believe this was Stephen Miran, based on commentary before his nomination to the FOMC that leaned quite dovish. 

To me, the most interesting part of yesterday’s FOMC meeting was how the Fed thinks about the path of the economy for the next couple of years:

To put it simply, the Fed:

• Anticipates higher GDP growth in 2026 than previously anticipated.

• Forecasts a lower unemployment rate in 2026 (despite it being concerned about the labor market).

• Sees higher inflation in 2026 than previously anticipated.

And yet despite higher growth, a stronger labor market and higher inflation, the FOMC somehow also anticipates more rate cuts than previously anticipated. 

That’s a confusing one, to say the least — and it really hits the nail on the head regarding the phase shift that the Fed is going through right now. 

Despite economic fundamentals making the case for a rate cut pause at the very least, the Fed is planning to cut more than it expected. 

The fact is, the US economy is doing okay amid a ton of noisy economic data. Yes, there’s some uncertainty in the labor market right now, but the fact of that matter is the Fed is resuming rate cuts into a decent economy. 

As the saying goes, don’t fight the Fed.

— Felix Jauvin

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