New Federal Reserve News Agency: The Federal Reserve hints at pausing interest rate cuts, New Bond King: Today may be the last time during Powell's tenure

The Federal Reserve cut interest rates for the third time this year, but at the same time issued signals that it may shift to a wait-and-see approach. This decision saw the first dissenting votes in six years, highlighting significant divisions within the committee on the importance of inflation versus the labor market.

In the early hours of Thursday Beijing time, the Federal Reserve voted 9 to 3 to lower the federal funds rate by 25 basis points to 3.5%-3.75%, the lowest level in three years. Federal Reserve Chairman Jerome Powell stated at a press conference that the Fed "can fully wait and observe how the economy develops."

Nick Timiraos, a well-known financial journalist known as the "new Fed communicator," wrote that the pressure of rising prices and a cooling labor market coexist in the U.S., presenting a tricky dilemma for the Fed that has not been encountered in decades.

Jeffrey Gundlach of DoubleLine Capital stated that he does not view this as a "hawkish rate cut." He also believes:

This may be Powell's last rate cut.

Powell will step down as Fed Chairman in May next year, and Trump has indicated he is close to announcing a successor.

Dot Plot Suggests Slowing Rate Cuts

In this Federal Reserve rate decision vote, Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeff Schmid believed that rates should not be cut, while Governor Stephen Miran advocated for a 50 basis point cut. This dual divergence reflects the significant differences in the decision-makers' assessments of the economic situation.

(Six members of the FOMC opposed the rate cut, four of whom did not have voting rights)

The quarterly forecast shows that most officials expect at least one rate cut next year, consistent with the September forecast, indicating that the decision-makers see no reason to accelerate the pace of easing.

Officials have raised their economic growth expectations for next year, but stagnation in inflation progress poses a higher threshold for further action. Recent public statements from Fed officials indicate significant divisions within the committee, and the final decision largely depends on Powell's intentions.

Powell stated that it is reasonable to cut rates now rather than wait until the next meeting at the end of January, although more data may be delayed due to the government shutdown. He indicated that adjusted employment growth may have been slightly negative since April. Powell emphasized:

The labor market continues to gradually cool, perhaps a bit slower than we expected.

Stagflation Risks Will Test the Pause Stance

The Federal Reserve faces a dilemma not encountered in decades: the coexistence of strong price pressures and a cooling labor market. This combination recalls the stagflation period of the 1970s, when the central bank's stop-and-go responses entrenched high inflation.

The U.S. Department of Labor will release employment data for October and November next week, and the Fed will also receive December employment data before its next meeting in late January. The impending flood of data complicates any strong efforts to signal policy intentions UBS Chief U.S. Economist Jonathan Pingle stated that as interest rates approach a neutral level that neither stimulates nor slows economic activity, each rate cut decision becomes more controversial. He said:

With each rate cut, you lose more support from participants, and you need data to persuade these participants to join the majority in supporting the cut.

Citi Global Chief Economist Nathan Sheets indicated that he will focus on January price data to see if companies will raise previously suppressed tariff-related costs at the beginning of the year. The Federal Reserve's target inflation rate is 2%, but the core inflation rate in September was 2.8%. He said:

Inflation has not returned to 2%, nor is there a compelling reason to believe it will return to 2% soon, which does concern me.

The response of long-term interest rates also limits the effectiveness of rate cuts. The yield on the 10-year U.S. Treasury bond fell to 4.01% before the first rate cut in September, but had risen to 4.185% by Tuesday, which limits the affordability for potential homebuyers and others expecting rate cuts to ease borrowing costs