The Federal Reserve lowered its benchmark interest rate by a quarter percentage point on Wednesday, marking its first cut since December. The decision, backed by an 11-to-1 vote, set the federal funds rate in a range of 4 to 4.25 per cent. Policymakers also signalled two additional cuts are planned before the year’s end, but Chairman Jerome Powell cooled speculation of an extended easing cycle, describing the move as a “risk management cut.”
Powell explained the cut as insurance against a possible slowdown, stressing that “there are no risk-free paths now” and characterising policy direction as a meeting-by-meeting assessment. The Fed’s latest projections also pointed to just one rate cut in 2026, slower than markets had been pricing.
Market reaction mixed
After a volatile session, US equities finished in mixed territory. The Dow Jones Industrial Average gained 260 points, or 0.6 per cent, to close at 46,018.32, after earlier touching a record high. The S&P 500 slipped 0.1 per cent to 6,600.35, while the Nasdaq Composite lost 0.3 per cent to 22,261.33.
High-flying technology names led the declines, with Nvidia, Oracle, Palantir and Broadcom all pulling back. By contrast, rate-sensitive stocks lifted the Dow, with gains in Walmart, JPMorgan and American Express. The small cap-focused Russell 2000 added 0.18 per cent, reflecting optimism that lower financing costs will aid smaller companies.
Economic outlook and Fed signals
In its post-meeting statement, the Fed highlighted cooling momentum in the jobs market and broader moderation in economic activity. “Job gains have slowed, and the unemployment rate has edged up but remains low,” the committee noted, adding that inflation “has moved up and remains somewhat elevated.”
Australian market
Local equities are set for a softer open. Futures suggest the S&P/ASX 200 Index will fall 15 points, or 0.2 per cent, to 8839, after Wall Street’s choppy finish. Investors will watch the August labour force report due at 11.30am. NAB forecasts unemployment at 4.3 per cent, with an employment gain of around 25,000 jobs.
