On Wednesday, the Fed took its long-anticipated action on rates and cut by 50bps, surprising some who thought the first move in the cutting cycle would be 25bps. In his post-meeting press conference Federal Reserve Chair Jerome Powell seemed to focus on one word – recalibration. Looking forward, the Chair made clear that all options will be on the table, and he repeated his mantra that future actions will be data-dependent.
At his press conference, Powell repeatedly made the point that both the overall economy and the labor market are in good positions, and the rate policy is designed to maintain the current good direction.
The next meeting is November 5/6. The next rate announcement will come the day after the election, thus removing any concern with political overhang.
Congress stalls
With the end of the current Federal fiscal year just over a week away, the House tried to pass a Continuing Resolution (CR) to keep the government funded for six months, until March 28, 2025. The House Speaker also added the SAFE Act, designed to require proof of US citizenship to register to vote. Democrats unanimously opposed both the six-month extension and the SAFE Act, arguing that it is already illegal for a non-citizen to vote.
The House CR failed on a vote of 202 Yes to 220 No, with 14 Republicans voting against the bill. A group of conservative Republican House Members typically votes against any CR as a matter of principle, making it impossible for the Speaker to pass a bill relying exclusively on Republican votes.
The Congress returns next week, and there is hope that the House and Senate can pass a three-month CR with no added deal-breaking provisions such as the SAFE Act. Speaker Johnson is under pressure from many of his members, who want to go home to campaign, as the entire House membership is up for re-election. Over the weekend, a lot of attention will be focused on former President Trump, who last week said that he would rather see a government shutdown than have a CR pass with no SAFE Act.
It will be a busy week ahead in DC, with the government funding deadline of midnight on September 30.
