Fed meeting recap: Powell says another rate cut in December 'is not a foregone conclusion'

The Federal Reserve is monitoring shifts in the employment landscape "very, very carefully" following a raft of recent layoffs at large U.S. companies, Chair Jerome Powell said Wednesday at a news conference in Washington.

"You see a significant number of companies either announcing that they are not going to be doing much hiring or actually doing layoffs, and much of the time they're talking about AI and what it can do," Powell said. "We're watching that very carefully."

Earlier this week, Amazon announced it would slash 14,000 jobs across its business, while media giant Paramount on Wednesday laid off at least 1,000 workers across its various divisions, including CBS News. UPS also revealed Tuesday that it would terminate 48,000 employees this year. Last week, Target said it would eliminate 1,800 corporate jobs, its first major layoffs in a decade.

— Liz Napolitano

The Federal Reserve's interest rate policy is unlikely to impact the tech sector's spending on artificial intelligence infrastructure, Chair Jerome Powell said.

"I don't think that the spending that happens to build data centers all over the country is especially interest sensitive," Powell said. "It's based on longer run assessments that this is an area where there's going to be a lot of investment and that's going to drive higher productivity."

"I don't know how those investments will work out, but I don't think that they're particularly interest sensitive compared to some of the other sectors," he said.

— Spencer Kimball

Fed Chair Powell said there's a growing sense among policymakers that it may be time to pause and assess the impact of the Fed's two cuts this year before moving again.

"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."

— Yun Li

Take tariffs out of the equation, and inflation isn't looking too bad, Chair Jerome Powell suggested Wednesday.

"Inflation, away from tariffs, is actually not so far from our 2% goal," he said at the post-meeting news conference.

Powell said the central bank estimates tariffs make up about five-tenths or six-tenths of the core personal consumption expenditures (PCE) price index, the Fed's main inflation gauge. That means, excluding tariffs, core PCE might be in the 2.3% to 2.4% range, he said.

"The thing about tariff inflation, the base case is it will come and it probably will increase further but … it will be a one-time increase," Powell said.

— Michelle Fox

The Federal Reserve will continue to get insight into the economy through sources outside of government data, but any great amount of uncertainty could affect what happens at the December meeting, Powell said.

"We get some data in inflation, some data in economic activity. We'll have a picture of what's going on. We also will have the Beige Book, again," Powell said. "I would say we're not going to be able to have the the detailed feel of things. But I think if there were a significant or material change in the economy one way or another, I think we'd pick that up through this."

"So in terms of how it might affect December, ... we just don't know what we're going to get. If there is a very high level of uncertainty, then that could be an argument in favor of caution about moving," Powell continued. "But we'll have to see how it unfolds."

— Sarah Min

Fed funds futures are pricing in a lower probability that the central bank cuts rates again in December.

The likelihood of the benchmark borrowing rate staying between 3.75% and 4% in December shot up to nearly 29% on Wednesday afternoon from around 9% a day prior, per CME's FedWatch tool. Meanwhile, the odds of another cut to a range of 3.5% to 3.75% dropped below 69% after surpassing 90% on Tuesday.

These shifts come after Fed Chair Jerome Powell said a decrease at the December meeting, which is the last of the year, "is not a foregone conclusion." Stocks took a leg down following those comments.

— Alex Harring

Traders were largely anticipating another rate cut before the end of the year, so as Fed Chair Jerome Powell cautioned that another reduction in December was not inevitable, stocks began to trade lower. At around 3 p.m., the Dow Jones Industrial Average was down 66 points, or 0.1%, while the S&P 500 was slightly below flatline. The Nasdaq was well off its high, but was still in the gren, with a 0.3% gain.

—Christina Cheddar Berk

Fed Chair Jerome Powell called out the ongoing federal government shutdown — which is currently the second-longest in U.S. history — as a drag on economic activity.

"The shutdown of the federal government will weigh on economic activity while it persists," Powell said during the Wednesday news conference. "But these effects should reverse after the shutdown ends."

Powell's comments come after the Congressional Budget Office said Wednesday that the month-long shutdown has resulted in a loss of at least $7 billion in gross domestic product by the end of 2026. CBO Director Phillip Swagel said in a letter that the loss will grow as the closure continues.

— Alex Harring

The Federal Reserve has gone four weeks without government data, but what is available points to a softening labor market, Chair Jerome Powell said.

"Although official employment data for September are delayed, available evidence suggests that both layoffs and hiring remain low, and that both households' perceptions of job availability and firms' perceptions of hiring difficulty continue to decline in this less dynamic and somewhat softer labor market," Powell said. "The downside risks to employment appear to have risen in recent months."

— Sarah Min

Fed Chair Jerome Powell said what economic data is available shows that economic growth has been surprising to the upside.

"Data available prior to the shutdown show that growth in economic activity may be on a somewhat firmer trajectory than expected, primarily reflecting stronger consumer spending," the central bank chief said.

The Fed has been hamstrung in assessing economic progress during the recent shutdown as all data collection and releases have been suspended.

—Jeff Cox

During a news conference, Chair Jerome Powell noted that members of the rating-setting FOMC were far from unified about what the central bank's next move should be.

"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."

—Jeff Cox

The Federal Reserve put policy on autopilot Wednesday thanks to the lack of economic data due to the government shutdown, said Alexandra Wilson-Elizondo, global chief investment officer of multi-asset solutions at Goldman Sachs Asset Management.

"A single soft inflation release, anchored expectations, and anecdotal cooling labor demand support a cautious easing bias," she said. "If conditions hold, another 25-basis point cut at the December meeting seems likely."

— Michelle Fox

"Lower rates with ample liquidity and relatively loose financial conditions can be a powerful combination," said Scott Helfstein, Global X head of investment strategy. "There is little doubt some of this is already priced into the market, but it would not be surprising to see equities advance further still."

Helfstein noted that the typically data-dependent Fed is operating with less information due to the ongoing government shutdown. This means it is relying more on high frequency and sentiment data, he said.

"The challenge is that these soft data points have continuously underestimated U.S. economic strength over the past quarters," Helfstein said.

—Pia Singh

Shortly after the Fed decision, stocks were still trading higher. The Nasdaq Composite climbed 0.5%, and the S&P 500 traded up 0.1%. The Dow Jones Industrial Average advanced 96 points, or 0.2%. All three leading U.S. indexes scored new all-time intraday highs in the trading day.

Although the Fed did not tip its hand as to what it may do at the next meeting in December in the statement, it did comment on its outlook for the economy. On one hand, policymakers said the economy "has been expanding at a moderate pace," a slight upgrade of its view on the economy. On the other hand, the central bank reiterated that "downside risks to employment rose in recent months."

The Fed has been operating without the benefit of key economic reports as a federal government shutdown has halted the collection of data that goes into employment and inflation reports.

—Christina Cheddar Berk, Sean Conlon

In the post-meeting statement, the Federal Open Market Committee acknowledged the uncertainty accompanying the lack of data, qualifying the way it categorized broad economic conditions.

"Available indicators suggest that economic activity has been expanding at a moderate pace. Job gains have slowed this year, and the unemployment rate has edged up but remained low through August; more recent indicators are consistent with these developments," the statement said. "Inflation has moved up since earlier in the year and remains somewhat elevated."

Read the full statement here and see how it's changed.

—Alex Harring

As expected, the Federal Reserve cut its benchmark rate by 25 basis points on Wednesday, bringing it down to a range of 3.75% to 4.00%. That rate influences many of the interest rates on loans offered to consumers.

For example, since most credit cards have a variable rate, there's a direct connection to the federal funds rate. When the Fed lowers rates, the prime rate also comes down and the interest rate on your credit card debt could adjust within a billing cycle or two.

Other types of loans, including auto loans, mortgages and student debt, may be less immediately impacted but there are still potential consequences for current and future borrowers. Here's the full breakdown of how today's decision could affect your finances.

— Jessica Dickler

Federal Reserve policymakers announced a quarter percentage point, or 25 basis point, cut to its overnight lending rate, which will bring the benchmark rate to a targeted range of between 3.75% to 4%.

The vote was 10-2.

—Christina Cheddar Berk

The lack of economic data due to the government shutdown may have the Federal Reserve hesitant to make any changes to its anticipated rate cut path, suggested Claudia Sahm, chief economist at New Century Advisors.

She's specifically focused on how the labor market is doing. The Bureau of Labor Statistics typically releases its monthly jobs report on the first Friday of the month, but that didn't happen in October.

"The Fed began reducing rates again because it is concerned that the labor market will be deteriorating and that you could have this slow job creation that we've seen turn into actually a contraction in jobs and then potentially a recession," she said in an interview with CNBC's "The Exchange."

"They are really wanting to get a sense of the momentum and that's when some of our key statistics went dark."

Sahm will be closely watching Fed Chair Jerome Powell's post-meeting press conference to see what he says about the central bank's assessment of risks around employment and inflation changing or not changing. September's data may help guide the current meeting, she noted.

"They don't have data to be confident enough to change the story, say, 'hey the labor market is getting better' or really double down on, 'it's getting a lot worse,'" she said.

— Michelle Fox

Details will matter. And one of those that will be watched closely will be how unified are the members of the decision-making Federal Open Market Committee.

Based on the flow of recent speeches from voting members, it's likely that Governor Stephen Miran may be the only dissenting vote. The recently appointed member is expected to favor a deeper cut as he did in September when he was the lone dissenter.

On the flip side, it's possible some regional governors may want to hold off on further cuts, but it's unclear how these members will vote this week. Presidents Beth Hammack of Cleveland, Lorie Logan of Dallas and Jeffrey Schmid of Kansas City are the ones to watch as each have expressed the need to be cautious with the pace of easing.

—Christina Cheddar Berk

When the Federal Reserve is in an easing cycle some stocks tend to outperform. These typically are companies that are very sensitive to interest rates. With that in mind, CNBC Pro screened for stocks that could rally into the year-end if policymakers indicate more cuts are ahead. Among the stocks that made the list were Blackstone and AvalonBay Communities. While some of these stocks are clearly rate-sensitive, the connection was less clear for others.

Read the full list here.

On Wednesday, traders are expecting that the Fed will signal if further cuts will be made to the benchmark lending rate either in December, at the central bank's next policy meeting, or early in 2026.

—John Melloy, Christina Cheddar Berk

With about an hour to go before the Fed issues its latest interest rate decision, the S&P 500 is up 0.25% and trading above 6,907. Earlier, the broad-based index set a fresh intraday high of 6,920.34.

JPMorgan's trading desk noted that it's highly unusual for the central bank to cut rates when the market is hitting all-time highs. It's only happened four other times by the firm's count, and it tends to be very bullish for the market. One year out, the S&P 500 has had an average return of 20% in these instances, according to JPMorgan.

—Fred Imbert, Christina Cheddar Berk

With an interest rate cut a near certainty Wednesday, markets will look for what guidance Fed Chair Jerome Powell will provide for the next meeting in December.

Bank of America economists think that with the current lack of economic data due to the government shutdown, Powell's likely inclination would be to seek another reduction before the end of the year. However, Powell is unlikely to commit following Wednesday's meeting.

"We think the Fed will acknowledge the recent strength of economic activity. But the broader shift in focus toward the labor mandate probably won't change," Bank of America U.S. economist Shruti Mishra said in a note. "Powell is also unlikely to offer much guidance beyond this meeting given the lack of official sector data and the current labor-consumption conundrum."

A report from ADP on Tuesday indicated that private payrolls picked up slightly over the past four weeks from their anemic growth path this year. Should the government impasse end and official data show further signs of stabilization in the labor market, that would discourage a December cut, Mishra said.

—Jeff Cox

The Federal Reserve will have more business to conduct beyond the expected interest rate cut at this week's meeting.

Along with the fully priced-in quarter percentage point reduction, the central bank is expected to discuss ending its balance sheet reduction, known as quantitative tightening. The Fed is still allowing a small amount of proceeds from its bond portfolio to roll off each month, rather than reinvesting.

However, markets will be looking for a clear indication that the program either is ending soon, or could conclude in October.

"I won't be surprised if they stop it at the meeting," said Luke Tilley, chief economist at Wilmington Trust. "It's probably more likely that they would say it's going to stop or taper down over the next 'x' number of weeks, four weeks or six weeks, and provide that guidance."

Fed officials also could note the challenges the face with the lack of official economic data during the government shutdown, and may tinker with wording in the post-meeting statement on economic conditions.

—Jeff Cox