We have a busy week ahead of us in the stock market, though we already know the most consequential event awaiting market participants: Wednesday’s decision on monetary policy from the U.S. Federal Open Market Committee (FOMC). It is widely expected that the Fed will cut rates at this meeting for the first time in 2025; the FOMC had cut rates by 100 basis points (bps) in the final three meetings of 2024.
There are two different trajectories complicating the Fed’s decision, based on its dual-mandate: full employment has begun to unravel with low monthly job gains — including a loss of -13K jobs in June of this year — while inflation is slowly growing, likely due to ongoing tariff policy with U.S. trading partners. Fed Chair Jerome Powell has recently stated the troubling jobs numbers have begun to take precedence over inflation rates.
Thus, a 25 bps cut is virtually guaranteed for Wednesday. There is an open question whether this can grow to 50 bps, which would bring levels to 3.75-4.00% for the first time in nearly three years. Cutting rates is far from a direct means of solving for a weakening labor market, but assisting the housing industry in providing lower mortgage rates would be one area that could eventually benefit.
Politics and Courts Now Affecting the Fed
Complicating matters is the politicization of the Fed. President Trump has long vilified Powell, the man he himself put at the head of the agency, for being “too late” in reducing rates. Following this, the White House turned its attention to Fed Governor Lisa Cook, whereby accusations of wrongdoing in her personal finances led to her firing by the president himself. The president can only remove a FOMC member “for cause.”
This firing caused an injunction that reversed Trump’s decision by a federal judge, but is now being contested by the White House to keep Cook from voting in this week’s monetary policy meeting at the FOMC. Cook has voted in line with Powell to keep rates steady through 2025 thus far.
In addition, later today the U.S. Senate will hold a cloture vote on whether to install a pro-Trump official to the FOMC. Stephen Miran has taken leave as the Chair of the Presidential Council of Economic Advisors in order to allow himself to be confirmed late this afternoon for the FOMC meeting, which begins tomorrow. Miran has stated in the past that he believes interest rates should come down by 300 bps.
For some context, at the last FOMC meeting, we saw the first dissent of more than one voting member in decades. Fed Governors Christopher Wasller and Michelle Bowman both sought a 25 bps cut back in July. Should Cook be removed from the FOMC ahead of the decision and Miran be allowed in, we’ll then see the largest internal dissent from the Fed Chair perhaps in U.S. history.
Empire State Manufacturing Swings Back to Negative: -8.7
For the first month in the past three, the Empire State Manufacturing Index posted a negative headline for September: -8.7. This is below the +4.5 analysts had been expecting, and a big swing from the 11.9 reported for August (which was the strongest month for manufacturing in the region since November of last year).
This is not a great number, but it’s fairly par for the course over the past year. Seven of the twelve months have posted negative has put up negative growth in New York State manufacturing. The similar Philly Fed survey comes out later this week, and it has posted negative month headlines in four of the past five months.
Image: Bigstock
Federal Open Market Committee Meeting in Focus
We have a busy week ahead of us in the stock market, though we already know the most consequential event awaiting market participants: Wednesday’s decision on monetary policy from the U.S. Federal Open Market Committee (FOMC). It is widely expected that the Fed will cut rates at this meeting for the first time in 2025; the FOMC had cut rates by 100 basis points (bps) in the final three meetings of 2024.
There are two different trajectories complicating the Fed’s decision, based on its dual-mandate: full employment has begun to unravel with low monthly job gains — including a loss of -13K jobs in June of this year — while inflation is slowly growing, likely due to ongoing tariff policy with U.S. trading partners. Fed Chair Jerome Powell has recently stated the troubling jobs numbers have begun to take precedence over inflation rates.
Thus, a 25 bps cut is virtually guaranteed for Wednesday. There is an open question whether this can grow to 50 bps, which would bring levels to 3.75-4.00% for the first time in nearly three years. Cutting rates is far from a direct means of solving for a weakening labor market, but assisting the housing industry in providing lower mortgage rates would be one area that could eventually benefit.
Politics and Courts Now Affecting the Fed
Complicating matters is the politicization of the Fed. President Trump has long vilified Powell, the man he himself put at the head of the agency, for being “too late” in reducing rates. Following this, the White House turned its attention to Fed Governor Lisa Cook, whereby accusations of wrongdoing in her personal finances led to her firing by the president himself. The president can only remove a FOMC member “for cause.”
This firing caused an injunction that reversed Trump’s decision by a federal judge, but is now being contested by the White House to keep Cook from voting in this week’s monetary policy meeting at the FOMC. Cook has voted in line with Powell to keep rates steady through 2025 thus far.
In addition, later today the U.S. Senate will hold a cloture vote on whether to install a pro-Trump official to the FOMC. Stephen Miran has taken leave as the Chair of the Presidential Council of Economic Advisors in order to allow himself to be confirmed late this afternoon for the FOMC meeting, which begins tomorrow. Miran has stated in the past that he believes interest rates should come down by 300 bps.
For some context, at the last FOMC meeting, we saw the first dissent of more than one voting member in decades. Fed Governors Christopher Wasller and Michelle Bowman both sought a 25 bps cut back in July. Should Cook be removed from the FOMC ahead of the decision and Miran be allowed in, we’ll then see the largest internal dissent from the Fed Chair perhaps in U.S. history.
Empire State Manufacturing Swings Back to Negative: -8.7
For the first month in the past three, the Empire State Manufacturing Index posted a negative headline for September: -8.7. This is below the +4.5 analysts had been expecting, and a big swing from the 11.9 reported for August (which was the strongest month for manufacturing in the region since November of last year).
This is not a great number, but it’s fairly par for the course over the past year. Seven of the twelve months have posted negative has put up negative growth in New York State manufacturing. The similar Philly Fed survey comes out later this week, and it has posted negative month headlines in four of the past five months.