In his press conference today, Fed Chair Jerome Powell told financial market participants that today's 25bps cut in the federal funds rate (FFR) might not be followed by another one on December 10, when the FOMC votes on monetary policy again. "In the committee's discussions at this meeting, there were strongly differing views about how to proceed in December," Powell said. "A further reduction in the policy rate at the December meeting is not a foregone conclusion. Far from it." Indeed, there were two dissenters. One wanted a 50bps cut today, while another wanted no cut.
Powell suggested that the Fed might be back in pause mode and once again in no hurry to lower the FFR further. "We're at a place now where we have, in fact, cut two more times ... we're 150 basis points closer to neutral, wherever that may be, than we were a year ago," he said at the news conference. "There’s a growing chorus now of feeling like maybe this is where we should at least wait a cycle, something like that."
Some FOMC participants are probably concerned that easier monetary policy is increasing financial instability. They probably don't want to feed the animal spirits in the stock market. We side with them.
The reaction of the bond market should certainly give Fed officials pause. The 10-year Treasury bond yield rose back over 4.00% today to 4.08% (chart). That's where it was before the Fed cut the FFR on September 17! The bond market isn't buying the Fed's cover story that interest rates were too restrictive.
