Yesterday’s rate cut by the Fed brings the rate to a range of 3.75%-4%, its lowest rate since November 2022. The decision was widely expected and was carried by a 10-2 vote.

Two FOMC Members Dissent from Rate Decision

Historically, Fed rate decisions have been unanimous but there was a split vote earlier this year. At yesterday’s meeting, Fed Governor Stephen Miran, an appointee of President Trump, voted for a larger half-point cut. Trump has been pushing hard for the Fed to lower rates, which has drawn criticism of political interference. Kansas City Fed President Jeffrey Shmid also dissented, voting for no change in the rate.

What’s Next for Powell & Co.?

The Fed rate statement did not provide any guidance as to what Fed policymakers are planning at the final meeting of the year in December. The statement said that inflation had moved higher and “remains somewhat elevated”, while the downside risks to employment rose in recent months”.

The Fed tries to reach a balance between full employment and stable inflation, and the risk of higher inflation and a weaker employment outlook makes it difficult for the Fed to determine in which direction to move with rates. If the Fed lowers rates further to boost the labor market, it would likely raise inflation, leaving the Fed stuck between a rock and a hard place.

In his post-meeting press conference, Powell dampened expectations that the Fed would again cut in December. Powell noted that there were “strongly differing views about how to proceed in December” and that many Fed members wanted to wait before lowering rates again. These remarks had a dramatic effect on market rate expectations, as the likelihood of a December cut has dropped to 70% from 90% just prior to the decision, according to CME’s FedWatch tool.

US Dollar Higher, Stock Market Mixed after Rate Decision

The US Dollar posted strong gains on Wednesday, despite the rate cut. The EUR/USD currency pair fell 0.43% on the day, while GBP/USD declined by 0.57%. The US Dollar posted its biggest gains against the Japanese yen, gaining 0.41% on Wednesday and 0.68% on Thursday.

US stock indices showed mixed results on Wednesday in response to the Fed’s rate decision.

The S&P 500 Index was virtually unchanged on Wednesday and closed at 6,890.

The Nasdaq 100 Index rose 130 points (0.55%) and closed at 23,958.

We hope you enjoyed reading our analysis of what’s going on with the US Dollar. If you’d like to trade the Loonie with one of the best Forex brokers in the world, check out our list.