The Fed lowered its benchmark policy rate to a 3.50%–3.75% range, a move that drew three dissents within the Federal Open Market Committee. Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeffrey Schmid argued for steady rates, while Governor Stephen Miran pressed for a deeper half-point cut. Updated projections released alongside the decision showed little change in the medium-term outlook, with policymakers still expecting only one 25-basis-point reduction in 2026.
The Committee’s statement emphasized that any further adjustments will depend on the flow of economic data—a phrasing that historically signals a pause in monetary action. Markets reacted swiftly: the dollar dropped 0.8% against the Swiss franc to 0.8000 and slid 0.6% versus the yen to 155.92. The euro gained 0.6% to trade at $1.1691, while the dollar index retreated 0.6% to 98.66.
Analysts noted that although traders had fully priced in the rate cut, the post-decision volatility reflected ongoing uncertainty around economic signals. Uto Shinohara of Mesirow Currency Management said the dollar’s reaction underscored “data gaps and shifting narratives,” pointing to concerns about labor-market softness and tariff-linked inflation risks.
Futures tied to the fed funds rate now imply a 78% probability that the Fed will hold rates steady in January, up from 70% before the announcement. Despite the Fed’s projections showing only one cut next year, markets continue to expect two cuts in 2026—implying an effective rate of about 3.0%.
Michael Rosen of Angeles Investments said that markets were particularly focused on the Fed’s acknowledgment of labor-market weakness, suggesting investors see room for further easing even if official forecasts do not yet reflect it. Recent U.S. data has shown a cooling but not collapsing economy: job openings in October rose modestly after a strong September rebound.
Meanwhile, Kevin Hassett, a White House economic adviser and the leading candidate to become the next Fed Chair, stated that there remains “plenty of room” for additional cuts, though he cautioned that inflation trends could alter the outlook.
By late Wednesday, major currency pairs reflected the dollar’s broad retreat. Sterling rose to $1.3382, the Australian dollar advanced to $0.6678, and the New Zealand dollar climbed to $0.5815. The dollar also slipped against the Canadian dollar, Norwegian krone, and Swedish krona, rounding off a session defined by recalibrated expectations for U.S. monetary policy.