The divided Fed announces a third rate cut, signaling just one cut for 2026. But stocks are cheering the Fed’s restart of short-term Treasury purchases. However, Oracle spoils the mood, while its profits revive. AI doubts dollar will be more stable after decline, Wall Street and Bitcoin reverse previous gains.
Fed Rate Cut Leads to Mixed Responses
The Federal Reserve cut rates by 25 basis points as planned on Wednesday, but only signaled further easing in 2026 in a hawkish move. But investors may have to wait a while for that reduction, as the wording of the FOMC statement suggested January was off the table.
The two regional Fed chairs – Goolsbee and Schmid – who opposed any rate changes, further emphasized this hawkish cut, while Trump-appointed Governor Stephen Miran again voted for a larger cut of 50 basis points. It is likely that hawkish dissent was even greater among non-voting FOMC members, pointing to more divided decisions in 2026.
The Fed announces a pause but no increase to buy Treasury bonds
However, even though the new dot chart disappointed investors who were expecting at least two additional reductions in borrowing costs over the coming year, Chairman Powell’s press conference after the meeting was not as hawkish as the statement or projections suggested.
Powell appeared to rule out a rate hike, saying it was “not part of anyone’s base case scenario at this point.” Separately, the Fed confirmed that on December 12 it would begin purchasing short-term Treasury securities to manage liquidity levels.
The first wave of purchases is expected to be in the order of $40 billion and will “remain high for a few months” before being “significantly reduced.”
The announcement sent rates down about 10 basis points and long-term yields also fell. Sovereign bonds were further boosted today by a successful government bond auction, sending yields lower globally.
Brief relief rally turns into liquidation on Wall Street
However, for equity markets, the Fed’s liquidity enhancement and resulting decline in yields were short-lived. Even though Wall Street has finished…
..
