The Federal Reserve is expected to lower interest rates by 25 basis points today. After that, the trajectory of rates — and what happens with the U.S economy they’re trying to shape — is anybody’s guess.
The economic outlook hasn’t shifted dramatically in recent weeks. The U.S. labor market has cooled and inflation remains somewhat elevated. Cutting interest rates today will signal that the Fed is more worried about American jobs than inflation.
Lawmakers are happy to see rates fall, even as they’re worried about what comes next. Multiple senators told us they were hopeful lower rates would translate to cheaper mortgages soon.
“The signal to housing and those that want to buy homes — it’s just going to be important to encourage them,” Sen. Cynthia Lummis (R-Wyo.) said.
Data, data, data. This will be the second time since October that the Federal Open Market Committee has convened against the backdrop of delayed or missing economic data due to the record 43-day government shutdown.
Policymakers and investors will scrutinize the heck out of Chair Jay Powell’s remarks after the FOMC announces its interest rate decision. But if Powell’s comments are anything like the last FOMC meeting, he’ll stress the uncertainty of this moment.
Even some of the Fed’s fiercest critics are sympathetic about the position the U.S. central bank finds itself in.
“Persistent inflation combined with a softening job market, and a lack of clear data, creates a lot of uncertainty for the Fed,” Sen. Elizabeth Warren (D-Mass.) said.
But others are more bullish. Sen. Bill Hagerty (R-Tenn.), a close ally of the White House, said he still saw the case for rate cuts well into 2026.
“I see the trends — all in the near, medium and long-term — moving in the direction of lower inflation. At the same time, we’ve seen softer numbers in terms of manufacturing output and private sector payrolls,” Hagerty said.
In trade news. Many of the Democrats on the House Ways and Means Committee are expected to support three-year extensions of expired trade programs for sub-Saharan African countries and Haiti in a markup this morning.
Ways and Means Democrats huddled privately after House votes Tuesday night and emerged largely ready to back the GOP bills — despite heavy opposition from labor unions who oppose the reauthorizations without Trade Adjustment Assistance. A few Democrats may vote no over TAA.
Ways and Means Republicans are trying to build momentum to extend the programs — AGOA and Haiti HOPE/HELP — in a legislative vehicle, potentially in January.
