Fed cuts interest rates, but inflation remains a concern – SPDR S&P 500 (ARCA:SPY)

The Federal Reserve’s decision on Thursday to cut interest rates by a widely expected 25 basis points gave investors relief, but not confidence. JP Morgan analyst Maia G. Crook said: Fed Chairman Jerome Powell acknowledged the resilience of the US economy, but inflation remains a thorny issue.

In his post-meeting press conference, Chairman Powell highlighted key growth drivers, including strong consumer spending and a strong labor market.

But he stressed that the fight against rising prices is not over yet, saying that persistent inflation, or the “elephant in the room”, is largely due to lagging pressures such as housing costs and insurance premiums. .

He noted that while Powell signaled some progress, he emphasized the Fed’s “data-dependent” approach and avoided offering a clear path forward.

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What’s next for December?

Mr. Crook expects another 25 basis point rate cut in December and quarterly rate cuts in 2025, but the Fed could hold off on cutting rates if inflation doesn’t continue to ease. I was warned that there would be. With Chairman Powell leaving options open, he suggests the Fed’s cautious stance reflects real concerns about stubborn inflation that could delay the easing path investors are hoping for.

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The politics behind it

Asked about the impact of the recent election, Powell stressed that his policy decisions remain apolitical, that he does not intend to resign if asked to do so and that he cannot legally be removed from his position. Mr. Crook said Powell’s clarification here reaffirmed the Fed’s independence and reassured markets wary of potential political pressure.

He believes the Fed is ready to cut interest rates in December, but investors should remain cautious as inflation remains serious. With Chairman Powell avoiding firm guidance, the Fed’s data-driven approach means a more moderate path is on the table if inflation remains stubborn.

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