FED votes 11-1 in favor of .50% rate cut

The most anticipated FED announcement in recent memory was finally revealed on Wednesday and the decision was made to reduce rates from 5-5.25% down to 4.75-5% with a .50% cut. Board Governor Michelle Bowman was the one dissenter favoring a smaller 25 basis point cut. That is the first dissenting vote by a Fed governor since 2005 and the first from any member since 2022.

In Fed Chairman Powell’s comments, he painted a picture where inflation, currently at 2.5% annually (CPI), has been tamed enough to suggest it will retreat to 2% over time and that the risk of a stagnating/recessionary economy overrides the inflation concern.

The 50-basis point cut probably would have been considered a surprise even two months ago, but market participants seemed to have it priced in by the actual day of announcement. Equities and Bond markets were active with when the cut was revealed but didn’t move that much in totality and remained within 2% of where they were trading prior to the release. Bold calls for big moves one way or another still have time to see those scenarios play out between now and the end of the year so there will be no victory laps. However, the quiet, non-headline grabbing predictions for a steady pace of business as usual have been winning thus far.

Speaking of business as usual, The Futures File is going Back to the Future with the OG, Mr. Walt Breitinger making his return to the author chair starting next week. It has been my pleasure to keep his seat warm giving me the opportunity to craft a weekly write up with my thoughts on commodities and financials. I look forward to his return and know you will as well.