Fed shows unity

President Trump’s frantic push to get White House economist Stephen Miran into the vacant Federal Reserve Board seat for the remaining months of former Governor Adriana Kugler's term didn’t sway officials to enact a 50 basis-point rate cut. While he dissented in favor of that, the rest of the Federal Open Market Committee showed unity by issuing the expected 25 basis-point lowering of the fed funds target range to 4–4.25%, citing slowing job gains and downside risks to employment.

It certainly was not a given that everyone would play nice. But nothing untoward surfaced, at least not enough to make the meeting statement. However, it will be intriguing to see if any drama shows up in the minutes. Even Governors Christopher Waller and Michelle Bowman supported the decision despite prior dissents and Waller’s recent campaigning for Fed Chair Jerome Powell’s role. White House pressure is surely not over, as evidenced by the administration announcing today it had asked the Supreme Court to allow Trump to remove Gov. Lisa Cook, who was able to vote yesterday.

Speaking of Chair Powell, who looked comfortable and confident at the press conference, he described the cut as a “risk management” move. While not overtly hawkish, he acknowledged softer labor conditions and uncertainty around price pressures. In contrast, the dot plot in the updated Summary of Economic Projections was slightly more dovish. A closer look revealed that, with the exception of one outlier — let’s call it the “Miran dot” reflecting a reduction of 150 basis points — it was a relatively close calculation between expecting one or two cuts by year-end. Officially, the median year-end 2025 rate slipped to 3.6%.

The 2026 median dot was 3.4% but the range was incredibly wide, from 2.6% to 3.9%, and therefore somewhat limited in terms of messaging. What is most important for next year is to sort out who will be a voting member and what they think, which is easier said than done at this time.

All administered rates moved down 25 basis points, maintaining existing relationships: the Reverse Repo Facility to 4.00%, Interest on Reserves to 4.15% and the Standing Repo Facility to 4.25%. The Fed also continued modest balance sheet reductions.