The Fed Cuts 25bps: Holiday Cheer or New Year Hangover?

The Federal Reserve just delivered a 25-basis-point rate cut, its third consecutive move to ease borrowing costs. The decision, widely anticipated by traders, lowers the target range to 4.25%-4.5% and sets the stage for Chair Jay Powell’s next challenge: explaining what comes next.

Inflation has cooled a bit, unemployment remains low, and the economy seems to be holding steady. In short, things aren’t screaming for an aggressive Fed rescue. But with market jitters and recession fears still lingering, J-Pow and company opted to give the economy a little extra breathing room.

But today’s sugar rush comes with a side of skepticism. Critics worry that more cuts could inflate asset bubbles or reignite inflation, particularly with President-elect Trump’s policy agenda looming.

For the housing market, this latest cut may not bring much relief. Mortgage rates remain stubbornly high, near 7%, as they continue to track resilient Treasury yields. And while the Fed has signaled it may pause further cuts for now, Powell’s has consistently hinted at flexibility depending on the economy’s performance.