Federal Reserve cuts interest rates by 0.25%, Powell says there’s ‘no risk-free path’
Markets reacted positively after the Fed cut interest rates by a quarter point on Wednesday.
Some of the optimism appears to be around the Fed’s outlook for the economy, which it predicts will grow 2.3% in 2026, following GDP growth of 1.7% this year.
“The treatment of productivity and growth is quite risk-friendly,” Evercore ISI’s Krishna Guha said in a note Wednesday. “The Fed chairman suggests that productivity could hover around 2%, which would allow the economy to grow faster without creating excessive inflation.”
Essentially, low rates, falling inflation and faster economic growth are the recipe for higher corporate profits, labor market stability and, as evidenced Wednesday, higher stock prices.
Fed officials were expecting another rate cut next year; The same figure was predicted in September. As of Wednesday afternoon Markets were pricing Additional interest rate reductions in April and June.
Guha said at Wednesday’s press conference that Powell seemed “fairly optimistic about productivity and growth, including AI impacts.”
He adds that Powell appeared to have a “calm tone rather than angry,” suggesting he was relaxed and in control rather than on the ropes as he was in October.
