The Federal Reserve delivered what markets expected on the surface: a 25-basis-point rate cut. But beneath that headline lies a far more consequential story—one that speaks to a deeply divided Fed, a funding system under strain, and the rising risk that policymakers are mistaking short-term labor market signals for long-term inflationary danger.
This was not a routine decision. It was the third cut since September 2024, bringing the total easing to 175 basis points. And crucially, it was not unanimous. The vote split nine to three, marking the first time since 2019 that the Fed has seen three dissents on a policy decision. More revealing still, those dissents came from both ends of the spectrum—hawkish and dovish—signaling that consensus inside the Federal Open Market Committee is fraying.
The Fed also announced what it carefully avoided calling quantitative easing: $40 billion per month in “reserve market purchases,” focused primarily on Treasury bills, with the option to extend into short-dated notes if necessary. Semantics aside, the intent is clear. The Fed is trying to add reserves back into a system that has grown too tight to support the sheer scale of the Treasury market.
But that raises a more uncomfortable question: what
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Thank you Jarrid!