🥛 What did we learn from the Fed meeting? 📝

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Here’s what we got for you today:

✍️ Everything you need to know about what happened at the Fed meeting
🎙️ The Milk Road Macro Show: What the Rate Cut Reveals About the 2026 Market Playbook w/ Kevin Muir
🍪 SpaceX is prepping a $1.5 trillion IPO

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EVERYTHING YOU NEED TO KNOW ABOUT WHAT HAPPENED AT THE FED MEETING

Congratulations - you’ve made it through another Fed week.

Federal Reserve Chair Jerome Powell delivered the 25bps interest rate cut that was expected by markets.

And it’s been confirmed that “balance sheet expansion” will begin again.

But the picture looking further ahead gets murkier from here on.

The Fed is currently stuck in an awkward position - and is heavily divided.

On one hand, inflation remains elevated - suggesting that rates should not be cut.

While on the other hand, there are signs of weakness in the labor market - suggesting rates should be cut.

So, what did we learn from this week’s Fed meeting?

What’s the outlook for next year?

And is “QE” back?

Let’s take a look…

Divided Fed

This meeting revealed just how divided the Federal Reserve has become.

We saw three official dissents (voting members explicitly disagreeing with the decision to cut rates by 25bps) - the most since 2019.

Two policymakers - Jeff Schmid and Austan Goolsbee - dissented in favor of leaving rates unchanged.

The other dissent came from Stephen Miran (“Trump’s man” nominated to the board in September), who continued to call for a larger rate reduction (50bps), as he has done at every meeting since he took up the role.

But we also saw some “silent dissents” as well.

The “dot plot” - which shows where policymakers think rates should be in the future - showed that six FOMC members thought there should have been no cut at this week’s meeting.

In his press conference, Powell said:

“A very large number of participants agree that risks are to the upside for unemployment and to the upside for inflation, so what do you do? You’ve got one tool, you can’t do two things at once. It’s a very challenging situation.”

This could be a signal that the next Fed Chair (who will take up the role in May 2026 when Powell leaves) may face big challenges if they attempt to gain consensus for further rate cuts next year.

Calvin Tse, head of U.S. strategy and economics at BNP Paribas, said:

“Chair Powell has been in the job for quite a long time and has a lot of respect on the FOMC. If even under his leadership there are now three dissents, it is hard for me to see a new Fed chair that finds it easier to get unanimity among FOMC participants.”

Outlook for next year?

We’ve now had the three 25bps cuts to finish off 2025 that have been widely expected for some time (September, October and December) - but what’s next?

There’s little signal in the Fed’s “dot plot” (showing where members think rates will be in the future) - which is all over the place.

It’s a complete mess - and shows the widely varying views among FOMC members.

Nevertheless, the “median dot” for 2026 calls for one 25bps rate cut next year.

Source: Bloomberg

But within the dot plot - 7 out of the 19 FOMC members see no cut in 2026, and 3 of them think there'll be a rate hike next year.

However, the market still thinks more than one cut is coming next year.

Market-based rate expectations are pricing in roughly two 25bps cuts next year - but the market is very uncertain about when those cuts might occur.

Fed predicts “goldilocks” environment?

We also saw an update to the Fed’s SEP (Summary of Economic Projections).

This showed that members (as a whole) raised their forecasts for GDP growth and lowered their forecasts for inflation in 2026.

Source: Federal Reserve

An environment with growth rising and inflation falling is often labelled a “goldilocks” environment for markets.

If true (a big “if”), this prediction would likely be good news for risk assets.

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EVERYTHING YOU NEED TO KNOW ABOUT WHAT HAPPENED AT THE FED MEETING (P2)

What did Powell say?

The overall conclusion from Powell’s press conference was that the Fed’s “recalibration phase” (that has been taking place in recent months) is now over - and the central bank is “well-positioned to wait”.

He reiterated that there is no “risk free” path for policy moving forward, and that the FOMC will continue to make decisions on a “meeting-by-meeting” basis.

But overall, reading between the lines of Powell’s press conference - I thought it was generally quite dovish.

He stated that while official government job growth data has averaged +40k per month since April, he believed that this number should actually be -20k, due to an “overstatement” in the numbers.

If that is correct - an environment where job growth is averaging -20k per month probably calls for a continued dovish stance.

Powell also said:

“If you get away from tariffs, inflation is really in the low 2s. So, it’s really tariffs that are causing most of the inflation overshoot. We do think of this as likely to be a one-time price increase.”

Putting both statements together - Powell basically said he thinks “the labor market is still quite bad, and inflation isn’t as bad as it seems”.

This viewpoint should point to a continued dovish monetary policy stance.

This may potentially open the door to more cuts in 2026 than the market is currently pricing in (roughly two 25bps cuts).

Bloomberg chief economist Anna Wong said:

"Even though the dot plot shows just one 25bps cut in 2026 - markets are pricing two - our view is that the Fed will end up cutting by 100bps next year... we anticipate weak payroll growth and scant signs of an inflation resurgence.”

However, the main takeaway from Powell is that the Fed still firmly has an “easing bias” - with rate hikes currently off the table.

He said:

“I don't think a rate hike is anyone's base case. Rates are either holding here, cutting a little, or cutting a lot.”

How did markets react?

Risk asset markets whipsawed.

Stocks and bitcoin moved higher during the press conference - but then gave up all those gains in the hours afterwards.

Source: TradingView

Meanwhile, the dollar (DXY) moved down and stayed down.

Source: TradingView

Treasury yields also moved down and stayed down.

Source: TradingView

“Quantitative Easing” is back?

The Federal Reserve also announced the start of what it is calling “Reserve Management Purchases” (RMPs).

The Fed will buy Treasury bills at a pace of $40bn per month in the coming months, starting on December 12, and then adjust thereafter.

This means the Fed’s balance sheet is likely to expand (incredibly slowly) moving forward.

In his press conference, Powell suggested that a monthly balance sheet expansion of $20-25bn is the new baseline.

I’ve been covering this for a while, and you can read my detailed views on why this is happening and what it means in a two-part series here and here.

I’m already tired of the social media discussions around whether this is “QE” or not - and it hasn’t even been 24 hours.

I would not personally label it “QE” - because it is such a loaded term.

I can tell you that this very slow buying of Treasury bills will have a minimal impact on risk asset markets.

It will be nothing like what people might imagine when they hear that “the Fed is doing QE”.

This is because:

The pace will be tiny - compared with more than $800bn per month between March 2020 and June 2020.
The Fed will be buying Treasury bills, not Treasury coupons. This is an important distinction. Buying bills does not “remove duration risk” from the market, and this is the key “asset price boosting power” of previous rounds of “real QE”.

This is not 2020 all over again.

It’s slightly “liquidity positive” on the margin, but that’s about it.

Wrapping up

So all-in-all - this was a Fed meeting that probably gave us more questions than answers.

The Fed still firmly has an “easing bias”, but is heavily divided - with some members expecting no cuts or even hikes in 2026.

Meanwhile, the market is pricing in roughly two cuts for 2026.

The Fed has a relatively positive outlook for 2026 - predicting inflation down and GDP growth up.

Powell believes the labor market may be worse than the figures suggest - and the inflation picture may be better than the figures suggest.

“Balance sheet expansion” is back, but at an incredibly slow pace and doesn’t involve buying Treasury coupons.

Some people will call this “QE” - I wouldn’t.

The three 25bps cuts that have been expected in late 2025 have now occurred - but the picture now gets murkier from here.

That’s it for this edition - catch you in the next one.

2026 MARKET MOVES START NOW 📉

In today’s episode, we sat down with Kevin Muir to talk about what the Fed’s surprise rate cut signals for markets in 2026, and how investors should be thinking about AI bubbles, energy plays, and second-order trades.

Here’s what you’ll hear: