Fed Delivers Quarter Point Cut But Doesn't Rule Out Pause In December — Key Highlights

The US Federal Reserve FOMC has cut the interest rate by 25 basis points to 3.75-4%.

The US labour market appears to be gradually cooling, while inflation remains somewhat elevated. The available indicators suggest that the economy continues to expand at a moderate pace.

In the near term, the risks to inflation remain tilted to the upside, stated Powell.

Powell also noted that there were strongly differing views during the discussion, and that the uncertainty around the December move needs to be considered going forward.

The US Federal Reserve's current monetary policy is moderately restrictive, Powell said.

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Powell said the current AI boom differs from the 1990s because companies today are already generating earnings from it. He noted that AI-related investment is clearly emerging as one of the major drivers of economic growth, although consumer spending remains a larger contributor to overall activity.

After trading in the green for most of the day, the US spot gold slipped around 0.9% to $3,915.23 an ounce, as Powell made it clear that the Fed is yet to decide on delivering the rate cut projected in the final month of this year.

Spot gold currently trades marginally higher at $3,963.54 per ounce.

Powell said monetary policy remains modestly restrictive, and that the continued cooling in the labour market reflects the impact of this restrictive stance.

Powell noted that the September CPI reading came in slightly softer than expected, while non-housing services inflation has been moving broadly sideways. He cautioned against drawing strong conclusions from non-market services prices and said core PCE excluding tariff effects may be around 2.3%–2.4%. Overall, the Fed Chair indicated that non-tariff inflation is now not far from the Fed’s 2% target.