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Below the Perspective on Fed Announcement by Siddharth Chaudhary, Head- Fixed Income, Bajaj Finserv AMC

FOMC: A Cut Without Commitment

The Federal Reserve delivered a widely anticipated 25 bps rate cut, lowering the target range to 4.00–4.25%, in response to signs of labor market softening and inflation still running above target. Chair Powell acknowledged that job growth has dipped below breakeven and described the labor market as “no longer solid”—a notable shift from earlier characterizations of strength.

At the same time, the Fed’s growth and inflation projections were revised upward, suggesting underlying resilience. Yet, the dot plot shifted lower, revealing a more dovish rate path and continued dispersion among policymakers. This divergence—stronger macro forecasts paired with a softer rate outlook—underscored the Fed’s cautious stance.

But what unsettled markets was not the cut itself, it was Powell’s tone. He spent considerable time reinforcing that the Fed is offering no guarantees. The FOMC is in a “meeting-by-meeting situation,” and this move was framed as a “risk-management cut”—a tactical adjustment to hedge against downside risks, not the start of a broader easing cycle.

Powell also addressed tariff-driven inflation, calling it likely short-lived, and stressed that the Fed would not allow a one-time price level shift to morph into persistent inflation.

Bottomline:
The Fed acted, but it didn’t commit. Powell’s message was clear: the path forward is uncertain, and policy will remain flexible. For markets hoping for a clearer signal, this was a reminder that the Fed is watching, not leading.

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