Yesterday felt a little like watching a boxing match where everyone expected a knockout in the first round, but the fight went all 12 rounds and ended in a split decision.
The Federal Reserve did exactly what markets priced in — they lowered the federal funds rate by 25 basis points — yet somehow managed to make the whole room arguing the second the bell rang. Stocks finished higher, bonds rallied, but if you listened carefully to the press conference and read between the lines of the statement, you could hear a central bank that is increasingly unsure about what comes next.
I’ve been covering Fed meetings for years, and I can’t remember the last time we had three dissents on a rate move that was supposed to be “widely anticipated.” That alone should tell you everything about the current mood inside the Marriner Eccles building.
A Hawkish Cut That Somehow Still Felt Dovish
Let me start with the part everyone is talking about today.
Yes, the Fed cut rates. Yes, Jerome Powell said all the right things about the economy being in a “good place.” And yes, risk assets loved it — the S&P 500 closed up almost 1%, the Nasdaq even better.
But beneath the surface? This was one of the most divided FOMC meetings in years.
Three Dissents — And One Came From the Dove Side
Three voting members said no to the cut. That’s the most since 2019.
Governor Stephen Miran — widely seen as a hawk — wanted a bigger 50 basis point cut.
But here’s the real surprise: Chicago Fed President Austan Goolsbee, usually one of the more dovish voices, voted to hold rates steady. So did Kansas City Fed President Jeffrey Schmid.
When even the doves are pumping the brakes, you know something has shifted.
“A 9-3 vote might look decisive on paper, but six of the nineteen participants essentially said they wouldn’t have cut if it were up to them alone. That’s not consensus — that’s a committee holding its nose and moving forward.”
In my experience, when the Fed has this level of internal disagreement, the path ahead usually gets bumpier, not smoother.
The Dot Plot Barely Budged — And That’s a Big Deal
If you were hoping for a clear signal that 2026 would bring aggressive easing, sorry to disappoint.
The median dot for 2026 stayed at just one rate cut all year. Same for 2027. The longer-run neutral rate remained around 3%.
Translation: Most officials still think we’re close to “done” on the cutting cycle.
- 2025: still two cuts priced in (50 bps total)
- 2026: still only one cut (25 bps)
- 2027: one more, then steady around 3%
Markets are currently assigning roughly a 38% chance of two cuts in 2026 by year-end. The Fed? Basically 0% chance according to the median dot.
Someone’s going to be wrong.
Stealth Easing Is Back — But Only For Bills
Buried in the implementation note was something a lot of traders completely missed in real time.
Starting Friday, the New York Fed will begin purchasing up to $40 billion per month in Treasury bills as part of its standing repo facility operations.
Officially, this is about keeping the federal funds rate inside the target range — overnight funding markets have been twitchy lately.
Unofficially? A lot of market participants immediately called this “stealth QE.”
“It’s not balance sheet expansion in the traditional sense, but injecting $40B a month of liquidity via bill purchases is functionally very similar to the early stages of QE. Risk assets noticed.”
— Fixed-income strategist at a major asset manager
Whether you want to call it QE-lite or just good plumbing, the effect is the same: more liquidity chasing assets at a time when many thought the Fed was done providing it.
The Economy Is “Extraordinary” — Powell’s Actual Word
Powell spent a lot of time during the press conference praising the current state of the U.S. economy.
“We have an extraordinary economy,” he said at one point. Not strong. Not solid. Extraordinary.
The committee backed him up by raising their 2026 GDP forecast from 1.8% to 2.3% — a half-point upgrade.
When the Fed feels this good about growth, it makes justifying additional rate cuts… complicated.
What Happens Next? Probably Nothing For a While
Here’s my personal read between the lines.
With three dissents, an unchanged dot plot, and Powell having only three meetings left as chair (January, March, and May), I think the bar for a January cut is now extremely high.
BlackRock’s Rick Rieder put it well:
“Given the lack of consensus on the Committee displayed today… we think the Fed is likely to remain on hold for a while.”
Comerica’s Bill Adams went even further, suggesting the Fed might end up cutting more than the dot plot in 2026 once new leadership arrives — but that’s a 2026 story.
For now, the most likely outcome is pause in January, reassess in March.
And honestly? After yesterday’s mixed message, that feels exactly right.
The bottom line: the Fed cut rates, but sent a loud signal that the cutting cycle is maturing fast. If you’re positioned for five or six more cuts over the next 18 months, you might want to reconsider.
Me? I’m keeping duration short and staying nimble. In this environment, flexibility beats conviction.
See you at the next FOMC meeting — it’s going to be a wild ride into 2026.
