Fed Cuts Rates by 25 Basis Points, Signals Slower Easing Ahead; Powell: “Near or at a Pause Point”

The Fed cut rates by another 25 basis points as expected, with one dissenting vote, signaling a slower pace of future cuts. The Fed now projects only two rate cuts for 2024, down from four. Powell noted that the Fed is "close to or at the point" of pausing further cuts and will need additional evidence of inflation progress for further action.

This marks the second consecutive 25 bps cut, but Cleveland Fed President Loretta Mester dissented, preferring to hold rates steady, revealing internal divisions. The Fed also lowered the ON RRP rate by 30 bps to 4.25%, aligning it with the lower bound of the federal funds rate for the first time since 2021.

The dot plot showed officials raising rate expectations for the next three years, with the 2024 and 2025 median projections up by 50 bps. GDP and PCE inflation forecasts were revised higher for 2023-2024, while unemployment estimates were lowered. Powell stressed that inflation control is progressing but emphasized that the Fed remains cautious, requiring more evidence before further cuts.

The "New Fed Whisperer" noted increased uncertainty about the pace and magnitude of future cuts, with the statement introducing language on the "magnitude and timing" of rate adjustments, suggesting a slowdown in the rate-cutting cycle.