Episode summary
Instant Reaction: The Fed Decides | Bloomberg Intelligence
Bloomberg Intelligence
· · Hosts: Tom Keene, Jonathan Ferro, Lisa Abramowicz, Paul Sweeney
Summary
The Federal Reserve cut rates by 25 basis points and signaled two more cuts this year, even as its own projections kept inflation sticky and growth a little firmer. The committee raised its 2025 GDP forecast to 1.6% from 1.4%, left unemployment at 4.5%, and kept core PCE at 3.1%, a mix that suggested policymakers were prioritizing labor-market risks over inflation risk.
The panel’s argument was that the Fed is now moving with a risk-management bias after weaker payroll revisions and signs of labor-market deterioration. Several participants argued the market had already priced in a deeper easing cycle, while others said the Fed was still above neutral and had room to cut without necessarily undermining inflation control. The dollar weakened, long-end yields fell, and bond bulls took comfort from the idea that policy is becoming more accommodative even as growth remains resilient.
The most important dissents centered on how much weight to put on inflation versus jobs. One governor dissented for a larger 50 basis point cut, reinforcing the sense that the new Fed is more dovish than the median dot suggests. The discussion also highlighted tariff pass-through, a K-shaped consumer backdrop, and how much politics may shape the committee’s path in 2026.
Key takeaways
- The Fed cut 25 basis points and projected two more cuts in 2025, but only one additional cut in 2026, showing a shallower easing path than the market expects.
- The committee raised 2025 GDP to 1.6% from 1.4% while leaving unemployment at 4.5% and core PCE at 3.1%, underscoring a growth-over-inflation tilt.
- One governor dissented for a larger 50 basis point move, and the wide 2026 dot dispersion suggested low conviction about the longer-run path.
- Several guests said the labor market revisions, not recession fears, were the main reason the Fed felt able to ease now.
- The bond market rallied and the dollar weakened because traders heard a more dovish Fed despite sticky inflation and still-elevated policy uncertainty.
Notable quotes
“It does look like the Fed will cut 25 basis points”
“And the unemployment rate is unchanged at 4 1.5%. PCE inflation at 3% is unchanged from their July forecast and core PCE inflation unchanged at 3.1%”
“the market is assigning a higher probability for a much more doubbish uh, you know, Fed committee, FOMC committee next year”
“we do think there'll be a series of rate cuts, but we're not expecting the cycle so much as we can tell at this moment in time to be as deep as the market has priced in”
How the episode opens
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It does look like the Fed will cut 25 basis points. — 25 basis point cut. — If they do 25 bips or if they do even 50, the market should be able to take it. — The Fed will still probably look be looking for for two cuts this year. Three cuts this year and more to come next year.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- fed decision
- monetary policy
- interest rates
- market action
- economic outlook
Watch the episode
Watch “Instant Reaction: The Fed Decides | Bloomberg Intelligence” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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