Fed meeting recap: Chair Jerome Powell defends central bank’s decision to go big with first cut

Federal Reserve Chair Jerome Powell does not see the risk of an economic downturn being “elevated” following the super-sized cut.

“I don’t see anything in the economy right now that suggests that the likelihood of a recession, sorry, of a downturn, is elevated,” he said.

“I don’t see that,” he continued. “You see growth at a solid rate. You see inflation coming down. You see a labor market that’s still at very solid levels. So, I don’t really see that now.”

— Sean Conlon

Federal Reserve Chair Jerome Powell does not expect the era of cheap money to return.

“Intuitively, most — many, many people anyway — would say we are probably not going back to that era where there were trillions of dollars of sovereign bonds trading at negative rates, long-term bonds trading at negative rates,” he said.

“My own sense is that we are not going back to that,” Powell added.

He feels the neutral rate is likely significantly higher than it was back then, although he does not know yet how high it is.

— Michelle Fox

The Fed’s goal now is to keep inflation stable while simultaneously ensuring jobless rates don’t tick higher, according to Fed Chair Jerome Powell.

“We’re trying to achieve a situation where we restore price stability without the kind of painful increase in unemployment that has come sometimes with disinflation,” he said in the post-meeting press conference.

Powell added that investors should take the Fed’s 50 basis-point rate cut as a sign of its “strong commitment” toward achieving that goal.

— Lisa Kailai Han

Despite one dissenting vote on the Federal Reserve’s decision to cut interest rates by 50 basis points on Wednesday, the central bank was largely on the same page about the decision, according to Federal Reserve Chair Jerome Powell.

“There was a lot of discussion back and forth, there was also broad support for the decision that the committee voted on,” Powell said.

“There is a dissent, and there’s a range of views, but there’s actually a lot of common ground as well,” he added.

— Brian Evans

The labor market is in solid condition and it is the Federal Reserve’s intention to keep it that way with Wednesday’s rate cut, Federal Reserve Chair Jerome Powell said.

“The U.S. economy is in good shape. It is growing at a solid pace. Inflation is coming down,” he said.

— Michelle Fox

Federal Reserve Chair Jerome Powell said the central bank is not in a hurry to ease policy, according to its projections.

“There’s nothing in the SEP (Summary of Economic Projections) that suggests the committee is in a rush to get this done,” Powell said in a press conference. “This process evolves over time.”

The so-called “dot plot” indicated that 19 FOMC members, both voters and nonvoters, see the benchmark fed funds rate at 4.4% by the end of this year, equivalent to a target range of 4.25% to 4.50%. The Fed’s two remaining meetings for the year are scheduled on Nov. 6-7 and Dec.17-18.

Through 2025, the central bank forecasts interest rates landing at 3.4%, indicating another full percentage point in cuts. Through 2026, rates are expected to fall to 2.9% with another half-point reduction.

— Yun Li

The Federal Reserve cut interest rates by a half-percentage point on Wednesday, but investors should not assume it will continue at that pace going forward.

“We’ve waited. And I think that patience has really paid dividends in the form of our confidence that inflation is moving sustainably under 2%, so I think that is what enables us to take this strong move today,” Fed Chair Jerome Powell said Wednesday. “I do not think that anyone should look at this and say, ‘Oh, this is the new pace.'”

“I think we’re going to go carefully meeting by meeting, and make our decisions as we go,” he said.

— Sarah Min

Federal Reserve Chair Jerome Powell said the U.S. labor market is currently “pretty close” to maximum employment but reiterated that the central bank was aware of signs that job growth has cooled.

“Clearly payroll job creation has moved down over the last few months, and this bears watching,” he said.

— Jesse Pound

The Federal Reserve kicked off its rate-cutting campaign Wednesday afternoon with a half-percentage-point reduction. But some investors believe the U.S. central bank jumped the gun with a rate cut that was too big, too soon for the current backdrop.

“Recent economic data suggests the economy is still relatively strong compared to other easing periods with unemployment at 4.2%, higher year over year but at a level that signals full employment, and GDP expanding at a 3.0% annual rate as of Q2 2024,” said Philip Straehl, chief investment officer of the Americas at Morningstar Wealth. He noted that half-point cuts “have been rare in recent decades,” adding that they were used during emergencies, such as the onset of the Covid-19 pandemic in March 2020 and in 2008 during the global financial crisis.

Straehl added that this more aggressive reduction indicates that the Federal Reserve “has gotten comfortable that the downward trends in inflation are sustainable” and is now redirecting its focus to pulling off a soft landing.

— Lisa Kailai Han

Powell said in his opening statement that the cut was a “recalibration” for the central bank and did not commit to similar moves at each upcoming meeting.

“This recalibration of our policy stance will help maintain the strength of the economy and the labor market, and will continue to enable further progress on inflation as we begin the process of moving toward a more neutral stance. We are not on any preset course. We will continue to make our decisions meeting by meeting,” Powell said.

— Jesse Pound

A key measure of the pace of price increases will show inflation fell to a 2.2% rate in August, Fed Chair Jerome Powell said Wednesday.

The central bank leader said the personal consumption expenditures price index got closer to the Fed’s 2% goal, having been at 2.5% in July. The Bureau of Economic Analysis will not release the final PCE number for August until late September.

“Our patient approach over the past year has paid dividends. Inflation is now much closer to our objective, and we have gained greater confidence that inflation is moving sustainably toward 2%,” Powell said in his postmeeting press conference.

— Jeff Cox

While the Federal Reserve may want to start its rate-cutting cycle without creating an asset bubble, 50 basis points “might have been too aggressive,” said Scott Helfstein, head of investment strategy at exchange-traded fund firm Global X.

“There are not many indications that the economy is slowing in the most recent numbers,” he said. “A larger cut probably was not needed out of the gate, but that should support risk-on asset allocation.”

“This may be one of the most anticipated and telegraphed [starts] to a rate cut cycle in years,” he added.

— Michelle Fox

The Federal Reserve may have “jumped the gun” by dropping interest rates 50 basis points, said Nancy Tengler, CEO and chief investment officer of Laffer Tengler Investments.

The economy is slowing but still strong, she said.

“Unemployment may indeed rise but we are not seeing layoffs — JOLTs still a very large number, well above pre-pandemic levels,” Tengler said. “My criticism of the Fed has been a myopic focus on backward-looking data. This feels like that. A single weak employment report and here we are.”

— Michelle Fox

The Federal Open Market Committee decision to lower its benchmark rate by 50 basis points did have one public dissent.

Fed Governor Michelle Bowman advocated for a 25 basis point rate cut, according to the policy statement.

Bowman joined the Board of Governors in 2018. She said as recently as July that an additional rate hike may be needed if progress on inflation stalled.

— Jesse Pound

The Federal Reserve’s updated policy statement said job gains have “slowed,” a change from previous wording that they had “moderated.” However, the statement did not include any additional language about economic growth concerns.

On inflation, the statement now says “the committee has gained greater confidence that inflation is moving sustainably toward 2 percent.”

Check out the full changes to the statement here.

— Jesse Pound

The S&P 500 and the Dow Jones Industrial Average touched fresh records following the Federal Reserve’s move to cut rates by 50 basis points.

At its high, the Dow jumped to 41,981.97, up more than 375 points. The S&P 500 reached 5,689.75, jumping 0.98% for a new record.

The major averages took back some of their gains shortly after as the big cut raised concerns about the economy.

— Darla Mercado

With Federal Reserve rate cuts likely imminent, investors should make the most of this “golden age of fixed income” now, according to Rick Rieder, BlackRock’s global chief investment officer of fixed income.

He believes there is a shift coming to the market, where equities will do no better than “OK” and tech stocks will no longer enjoy the “fever pitch” they have had. Instead, investors should buy yield “and just watch it do its thing,” he said.

“The idea of, ‘Gosh, I can lock in for three to five years — and you don’t have to go out to 30 years — I can lock in these yields for the next three to five years.’ I think it’s a pretty compelling proposition,” said Rieder, who manages the BlackRock Flexible Income ETF (BINC).

To find out where Rieder is investing right now, read the full story here.

— Michelle Fox

The major averages flickered near the flatline as the Federal Reserve’s rate decision approached. As of 1:39 p.m. ET, the S&P 500 and the Nasdaq Composite were up nearly 0.1%. The Dow Jones Industrial Average climbed about 28 points, or just shy of 0.1%.

Treasury yields inched up, with the rate on the 10-year note trading at about 3.67%, reflecting a nearly 4 basis point jump. The 2-year Treasury yield added about 5 basis points to trade at 3.64%.

— Darla Mercado

The Federal Reserve’s high interest rate regime — with the current target range of 5.25% to 5.50% — rewarded investors who stashed cash into money market funds and high-yield certificates of deposit, but that party is about to end.

High yields on cash are set to come down once the Fed dials back rates, meaning investors should redeploy some of that money into bonds with greater duration.

Intermediate-term bonds allow investors to lock in today’s higher yields while mitigating exposure to dramatic price swings tied to interest rates.

CNBC Pro subscribers can read the full story here.

— Darla Mercado

With the Federal Reserve expected to make its first interest rate cut in four years Wednesday, it is time to take a look at how the stock market performed at the start of prior easing cycles.

What the stock market did historically after the first Fed rate cut depended largely on the economy, historical data shows. In total, across all cycles, the S&P 500′s performance in the aftermath of the first cut was largely positive but with some big misses when the economy turned down.

CNBC Pro subscribers can read the full story here.

— Sarah Min

There are a few high-dividend stocks — including several energy names such as Exxon Mobil and ConocoPhillips — with strong upside potential that investors can tap into as the Federal Reserve is expected to begin cutting interest rates.

Lower rates should make the yields for dividend stocks even more attractive, lifting the group. These stocks can also be used as a reliable hedge against any economic slowdown in case central bankers end up being behind the curve on rate cuts.

Using the CNBC Pro Stock Screener tool, we searched for stocks with a dividend yield above 3% and a low debt-to-equity ratio under 60%. They have big payouts and are low debt loads, meaning they should be able to keep paying that dividend. They are also poised to see 10% or more upside, per analysts.

Click here to view the results on CNBC Pro’s Stock Screener tool and to make your own screener. Read the full story in CNBC Pro.

— Pia Singh

Many investors are betting that the Federal Reserve will be able to stave off a recession as it eases monetary policy from current levels.

Against this backdrop, CNBC Pro screened for stocks that have done well when the Fed cuts rates without a recession. Some of the names that made the cut are Nike, Amgen and UnitedHealth.

CNBC Pro subscribers can read the full list here.

— Fred Imbert

Traders are eagerly awaiting the Federal Reserve’s rate decision — and the conclusion of the central bank’s two-day meeting promises to be riveting.

The Fed is expected to make its first rate cut since 2020, but markets are split on whether policymakers will trim by 25 basis points or 50 basis points. One basis point is equal to one one-hundredth of a percent. Currently, the Fed’s target range for rates sits at 5.25% to 5.50%.

Wall Street will also delve into the Fed’s “dot plot,” where policymakers share their expectations for rates over the next few years. At the conclusion of this meeting, the central bank officials will also issue their Summary of Economic Projections, which includes forecasts for gross domestic product and inflation.

Read more from CNBC’s Jeff Cox on what investors can expect from the Fed.

— Darla Mercado

The Federal Reserve is expected to make its first cut to interest rates on Wednesday after more than two years of tight monetary policy. The central bank’s target rate range currently sits at 5.25% to 5.50%.

Higher rates have been tough on borrowers, with the rate on the 30-year fixed mortgage rising to 6.12% as of the week of Sept. 13, according to Mortgage News Daily. That is up from 4.29% during the week of March 11, 2022, just prior to the Fed kicking off its first hike.

Home equity loans have also become more expensive, with rates rising to 8.49% as of last week, compared to 5.96% back in March 2022, according to Bankrate. Credit card interest rates have also jumped more than 400 basis points since the Fed started its rate increases, rising to 20.78% as of last week, Bankrate found. One basis point is equal to one one-hundredth of one percent.

The Fed’s tight policy has provided a silver lining to savers, however. The annual percentage yield on a five-year certificate of deposit has jumped to 2.87%, up from 0.5% in March 2022, according to Haver. Yields on money market funds have also jumped, sitting at 0.46% last week, versus the 0.08% paid just before the Fed began tightening policy in March 2022, Haver found.

— Darla Mercado, Nick Wells

In the hours leading to the Federal Reserve’s rate decision, investors remain split on the extent to which policymakers will cut rates.

Fed funds futures trading suggests a 55% likelihood that central bank officials will dial back rates by 50 basis points, according to the CME FedWatch Tool. They also imply a 45% probability of the Fed lowering rates by 25 basis points. Currently, the Fed’s target rate range is 5.25% to 5.50%. One basis point is equal to one one-hundredth of a percent.

Investors should watch what they wish for, according to Aditya Bhave, senior U.S. economist at Bank of America. The firm anticipates a 25 basis point cut on Wednesday, warning that a 50 basis point cut could ultimately be a worrisome sign.

“Risk assets might initially rally on the back of this dovish surprise,” Bhave wrote Wednesday. “But we’d caution investors that the act of cutting by 50bp means the Fed is less confident about a soft landing.”

 — Darla Mercado