Yesterday, the Fed lowered the federal funds rate by 0.25 percentage point to 4.00%–4.25%, its first cut of 2023. The vote was 11–1; newly sworn-in Governor Stephen Miran dissented for a 50 bps cut. Chair Jerome Powell framed the move as insurance against a weakening labour market, while noting inflation is still “somewhat elevated.”

Related: The Fed’s Rate Cuts: What Drives Decisions — And Why Now

Powell’s Key Messages: What He Said and Why

Fed Chair Jerome Powell struck a careful balance in his press conference, highlighting both the risks to the labour market and the uncertainty around inflation. His remarks offered clarity on why the Fed acted, and why it didn’t go further.

No preset path

“Individual forecasts are not a plan. We’re not on a preset course. Decisions will be based on the incoming data and the balance of risks.”

Meaning: No automatic sequence of cuts; every meeting is live.

Why cut today? Risk management

“You could think of today’s cut as a risk-management cut.”
An insurance move to cushion a weakening job market without declaring an emergency.

Labor market slipping

“Job gains are now running below the breakeven rate.”
“Revised jobs numbers mean the labor market is no longer solid.”
“The moderation in GDP growth largely reflects consumer spending slowdown.”
Hiring is too soft to keep unemployment from rising; consumer demand has cooled.

Inflation still elevated, but expectations anchored

“Inflation has risen recently, remains somewhat elevated.”
“Beyond next year most inflation-expectation measures [are] consistent with our 2% goal.”
Near-term price pressure persists, but longer-run credibility remains intact.

Tariffs: base case vs. uncertainty

“The base case is that tariff-driven price increases will be short-lived.”
“The overall effect of tariffs on inflation remains to be seen.”
“Possible tariffs are a reason for some slowing in the labor market.”
“Expect tariff-driven price increases to continue this year and next.”
Tariffs are lifting some prices and may be nudging hiring lower; Fed treats the impact as mostly one-off but is not ruling out persistence.

No broad support for a bigger move

“There was not widespread support for a 50 basis point cut today.”
Committee preferred a cautious 25 bps step over an aggressive cut.

Regarding Powell’s frame:

  • Policy is data-dependent, not pre-committed.
  • Risks are two-sided: softer jobs vs. still-elevated inflation.
  • Yesterday’s move is insurance, not a pivot to rapid easing.

Powell and the statement pointed to a cooling labor market (revisions and softer payrolls), moderating growth led by slower consumer spending, and inflation that has risen recently but remains off the 2022 highs. The balance of risks now tilts toward employment, hence an insurance cut, with further moves data-dependent, not pre-committed.

Powell made clear the Fed isn’t on autopilot. They’ll move meeting by meeting. Yesterday’s cut was more of a safety cushion than the start of a big easing cycle.

How Markets Reacted Yesterday

Stocks: Choppy to mixed — Dow up, S&P 500 flat to slightly lower, Nasdaq down as traders weighed “dovish cut” vs. cautious guidance.

Bonds & Dollar: Yields wobbled; the dollar’s post-decision slide reversed into a steadier tone as investors parsed Powell’s caveats.

Banks’ prime rate: Major banks cut prime from 7.50% → 7.25%, passing the move into consumer/business credit benchmarks.

Related: Fed approves quarter-point interest rate cut and sees two more coming this year

How We Opened Today — and What’s Next

Futures in the U.S. and Europe nudged higher overnight as investors grew more comfortable with a gradual easing path; Asia largely bought the dip. Oil eased on growth worries; gold hovered near highs after a volatile post-Fed pop.

Near-term market direction now hinges on:

  1. whether incoming jobs and inflation data confirm cooling without re-accelerating prices, and
  2. Powell’s follow-through — i.e., if the Fed validates the two-more-cuts glidepath or pivots back to “wait-and-see.” Analysts warn the cut came with caveats, so rallies may be fragile if data disappoint.

What It Means

For borrowers: Mortgages, HELOCs, auto loans and cards won’t plunge overnight, but the prime-rate cut and lower Treasury yields are a first step toward easier credit — especially if two more cuts land this year.

For stocks: Lower rates are supportive, but tech/growth may remain headline-sensitive; cyclicals and rate-sensitives (housing, retail) typically benefit if borrowing costs keep easing.

For crypto/commodities: Easier policy and a softer dollar tend to support Bitcoin and gold; oil tracks demand expectations, which are still uncertain if growth slows.

The Fed delivered the cut “everyone expected,” but Powell’s message was cautious: jobs are wobbling, inflation isn’t tamed, and policy is not pre-set. Markets like the direction, just not too fast, and only if the data cooperate.