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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. The Federal Reserve voted

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Speaker 1: to cut interest rates by twenty five basis points. That's

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Speaker 1: a quarter percentage point after holding them steady this year.

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Speaker 1: This is a pretty boring outcome for a meeting that's

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Speaker 1: had a lot of drama around it. By boring, I

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Speaker 1: mean well telegraphed, expected, no surprises, just how the FED

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Speaker 1: likes to operate. Here's how Fed Chair Jerome Powell explained

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Speaker 1: the decision to reduce rates.

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Speaker 2: At today's meeting. The committee decided to lower the target

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Speaker 2: range for the Federal friends rate by a quarter percentage

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Speaker 2: point to four to four and a quarter percent, and

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Speaker 2: to continue reducing the size of our balance sheet.

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Speaker 1: The drama around this meeting was more about politics than

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Speaker 1: monetary policy. President Trump has been pressuring policymakers to lower

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Speaker 1: interest rates. On Sunday, he called for a big cut.

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Speaker 2: I think you have a big cut because I really

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Speaker 2: don't think he can help with cutting.

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Speaker 1: It's perfect for cutting, and Trump has been trying to

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Speaker 1: reshape the Federal Reserve to make it more responsive to

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Speaker 1: his wishes. In fact, the FED meeting started on Tuesday,

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Speaker 1: but it wasn't until Monday that we knew who would

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Speaker 1: actually vote on the committee. That's when the US Senate

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Speaker 1: confirmed the president's pick to fill a vacancy on the

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Speaker 1: Fed's board, one of his chief economic advisors, Stephen Myron.

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Speaker 1: It's also when a federal appeals court ruled that FED

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Speaker 1: Governor Lisa Cook, who President Trump has tried to fire,

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Speaker 1: could hold on to her seat at least for now.

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Speaker 1: So this boring rate cut, it shows the FED seems

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Speaker 1: to be resisting political meddling for now. Amara Mokway covers

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Speaker 1: the FED for Bloomberg, and she says it also signals

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Speaker 1: growing unease about US employment.

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Speaker 3: So there's just growing concern among some FED officials and

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Speaker 3: economists that the labor market could be at a tipping point.

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Speaker 3: And the problem with that is once the labor market weekends,

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Speaker 3: once we really start to have unemployment rise, it can

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Speaker 3: happen very quickly and severely.

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Speaker 1: There was a very lackluster jobs report for the month

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Speaker 1: of August and a big revision of jobs data for

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Speaker 1: a twelve month period that ended in March. That report

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Speaker 1: showed the US economy added about nine hundred eleven thousand

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Speaker 1: fewer jobs than first estimated. But the FED also has

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Speaker 1: to keep an eye on inflation, and Amer says that

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Speaker 1: means the FED needs to strike a delicate balance.

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Speaker 3: There are concerns about the potential for tariffs to drive

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Speaker 3: inflationary pressures in a way that is persistent, and so

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Speaker 3: that is part of the Fed's challenge right now.

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Speaker 1: Powell acknowledged this tension in his post meeting news conference.

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Speaker 2: Our obligation is to ensure that a one time increase

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Speaker 2: in the price level does not become an ongoing inflation problem.

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Speaker 2: In the near term, risks to inflation are tilted to

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Speaker 2: the upside and risks to employment to the downside. A

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Speaker 2: challenging situation.

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Speaker 1: I'm David Durat and this is the big take from

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Speaker 1: Bloomberg News Today, and the sh show what the Federal

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Speaker 1: Reserve's rate cut says about the state of the US

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Speaker 1: job market, the broader economy, and the central banks independence.

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Speaker 1: The Federal Reserves interest rate cut of twenty five basis

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Speaker 1: points was very much in line with what Wall Streets expected.

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Speaker 1: I asked Bloomberg Fed reporter Ameramokway, what a quarter point

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Speaker 1: cut tells us about how the FED is thinking about

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Speaker 1: the economy.

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Speaker 3: What it signals is that concerns about the labor arget

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Speaker 3: have grown, and the FED wants to respond to that.

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Speaker 3: At the same time, there was some talk about whether

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Speaker 3: they should do a bigger cut a half point cut,

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Speaker 3: and by them not doing that, I think that is

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Speaker 3: also an acknowledgment that there are still concerns about the

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Speaker 3: inflation responsibility that they have and they don't want to

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Speaker 3: go too fast or too big, right, so they really

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Speaker 3: are trying to balance concern for the labor market and

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Speaker 3: concern for inflation.

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Speaker 1: This is what's known as the FED dual mandate. Its

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Speaker 1: two main goals are to keep inflation in check and

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Speaker 1: to promote maximum employment.

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Speaker 3: Sometimes the goals kind of align where they can kind

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Speaker 3: of address both at the same time.

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Speaker 4: Right, So, last September.

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Speaker 3: They did a half point cut, and they did that

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Speaker 3: because there were warning signs of the labor market at

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Speaker 3: that point.

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Speaker 4: But at the same time, inflation was kind of moving

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Speaker 4: in the direction that.

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Speaker 3: They wanted it to move, so they could lower rates

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Speaker 3: in a way that they felt comfortable with because they

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Speaker 3: weren't necessarily worried about inflation. The problem here is that

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Speaker 3: we're kind of in the opposite scenario where there are

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Speaker 3: growing concerns about the labor market and at the same

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Speaker 3: time there are concerns about the potential for tariffs to

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Speaker 3: drive inflationary pressures in a way that is persistent, and

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Speaker 3: so that is part of the feeds challenge right now.

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Speaker 3: Their mandates are kind of intention and unlike last year

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Speaker 3: when they were like, well, labor market is a little iffy,

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Speaker 3: inflation is moving in the right way, so we can

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Speaker 3: make this very clear cut to stay vision here. It

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Speaker 3: is not as clear cut of a decision. That is

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Speaker 3: why they have been on hold all year, and that

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Speaker 3: is why we are seeing among FED officials themselves growing

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Speaker 3: disagreement about what the FED should actually be.

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Speaker 4: Doing right now.

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Speaker 1: Not all the FED governors were on board with this decision.

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Speaker 1: Notably the newest member of the committee, Stephen Myron, who's

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Speaker 1: been the chair of President Trump's Council of Economic Advisors, dissented.

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Speaker 1: I asked Amara about the argument both Myron and the

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Speaker 1: President have been making for going bigger, for cutting rates

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Speaker 1: by a half percentage point, as Myron advocated for at

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Speaker 1: this meeting, or more so.

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Speaker 3: I think people who were talking about a big cut,

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Speaker 3: there are a couple of reasons. Right if you are

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Speaker 3: in the camp that, okay, the FED has been on

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Speaker 3: hold this whole year, and they were wrong to be

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Speaker 3: on hold. Then you say, look, they need to kind

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Speaker 3: of fix that by going bigger here, right, kind of

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Speaker 3: making up for lost time or making up for lost grounds.

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Speaker 3: So they need to go bigger here. The President's argument

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Speaker 3: is a little different. He is calling for very large

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Speaker 3: moves because he has a couple of different economic policy

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Speaker 3: goals that he essentially wants the FED to support. Namely,

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Speaker 3: he wants barring costs for the US government to come down,

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Speaker 3: and he feels that by the FED cutting more aggressively

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Speaker 3: that will help him in this effort that he has

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Speaker 3: to bring down the government's baring costs strength the deficit.

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Speaker 3: And so the President, I think, is speaking more in

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Speaker 3: favor of his own economic agenda, whereas those who are

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Speaker 3: concerned that maybe the Fed's policy is having too much

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Speaker 3: of a restraint on the economy right now, especially as

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Speaker 3: we have these growing labor market concerns, have said, perhaps

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Speaker 3: it makes sense for the FED to do a bigger

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Speaker 3: move to kind of take some of that restraint off.

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Speaker 1: You look at FED Chair J. Powell's tenure, and for

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Speaker 1: so long he was so good at fostering unanimity among

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Speaker 1: members of the Fed's Rates setting Committee. That started to

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Speaker 1: change at recent meetings. We've seen more descents, We're seeing

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Speaker 1: members of this committee different positions. Ahead of this meeting,

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Speaker 1: there was some uncertaint about who'd actually be there. Lisa

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Speaker 1: cooka FED governor, was allowed to sit for this meeting

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Speaker 1: an appeals court rule that she could participate. President wants

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Speaker 1: to fire her from the committee. There was a new

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Speaker 1: committee member, Stephen Myra, and a Trump economic advisor who

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Speaker 1: was confirmed by the Senate on Monday, really at the

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Speaker 1: eleventh hour here just in time for the start of

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Speaker 1: this meeting. How much has Fed churchier own palaced job changed,

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Speaker 1: kind of managing all of these different perspectives now that

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Speaker 1: we're here in September of twenty twenty five.

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Speaker 3: Yeah, I think he has a much harder time right now,

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Speaker 3: right because let's compare where we are now to where

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Speaker 3: we were when inflation took off in the wake of

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Speaker 3: the pandemic. Then policy decisions weren't that hard, Right, Inflation

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Speaker 3: is at multi decade high. What should the FED be

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Speaker 3: doing in that situation? It should be hiking, it should

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Speaker 3: be tightening, right, And so there there was a little disagreement,

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Speaker 3: but not to the extent that we are seeing now, right,

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Speaker 3: because the economic outlook is just so uncertain and there

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Speaker 3: are a range of views about just how weak the

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Speaker 3: labor market is, what factors are driving the weak labor market,

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Speaker 3: data that we've seen, what the impact of tariffs will be, right,

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Speaker 3: So there's just so much more uncertainty now that just

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Speaker 3: makes it harder to have consensus. At the same time,

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Speaker 3: this growing lack of consensus, I think it's just like

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Speaker 3: such a poignant representation of the fact that change at

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Speaker 3: the FED is at hand. It is happening, these changes

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Speaker 3: with Stephen Meyern joining the board, President Trump trying to

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Speaker 3: outsles a cook like this is just the beginning, right,

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Speaker 3: President Trump is going to pick a new chair, and

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Speaker 3: that chair is likely going to be very different from

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Speaker 3: chair power. And so all these changes, the descents, the

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Speaker 3: new people, people leaving people, President Trump trying to fire people,

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Speaker 3: it's just the clearest sign that this time next year

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Speaker 3: we're probably going to be looking at a very different

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Speaker 3: FED than what we.

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Speaker 1: Have now coming up inflation, employment, and revisions. What FED

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Speaker 1: policymakers see when they dig into the data in setting

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Speaker 1: interest rates. The Federal Reserve is famously data dependent. That's

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Speaker 1: their way of saying, there's no gut feelings, no vibes.

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Speaker 1: They stick to the numbers. Fed policymakers look at all

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Speaker 1: kinds of data, but they pay extra close attention to

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Speaker 1: employment and inflation. Bloomberg's amera A mok Way says inflation

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Speaker 1: is still higher than they'd like.

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Speaker 3: So inflation is still above the Fed's two percent target.

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Speaker 3: And the impacts of President Trump's tariffs, the policies have

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Speaker 3: obviously changed a lot since you know, he first announced them,

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Speaker 3: have started to show go up. But the feeling is

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Speaker 3: that the inflation data suggesting that for now companies appear

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Speaker 3: to be absorbing most of the costs of these terraffs

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Speaker 3: and not passing them on to consumers. And so people

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Speaker 3: who are in supportive rate cuts are taking the inflation

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Speaker 3: data and saying, see, tariffs aren't really showing up in

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Speaker 3: any kind of meaningful way so far, therefore the Fed

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Speaker 3: can cut.

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Speaker 4: Therefore they don't.

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Speaker 3: Need to be on hyper guard about tariff induced inflation.

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Speaker 3: But then you've had Chair Powell and others say, look like, yeah,

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Speaker 3: it is possible that these terroriffs will result in like

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Speaker 3: a inflation bump that quickly passes but we can't take

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Speaker 3: that for granted, especially with the fact that inflation is

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Speaker 3: not yet back at our.

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Speaker 4: Target, so we have to be a little careful. So

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Speaker 4: that's where we are.

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Speaker 1: How Will addressed that challenge at his press conference on Wednesday.

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Speaker 2: Higher tariffs have begun to push up prices in some

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Speaker 2: categories of goods, but their overall effects on economic activity

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Speaker 2: and inflation remain to be seen. A reasonable base case

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Speaker 2: is that the effects on inflation will be relatively short lived,

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Speaker 2: a one time shift in the price level. But it

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Speaker 2: is also possible that the inflationary effects could instead be

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Speaker 2: more persistent, and that is a risk to be assessed

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Speaker 2: and managed.

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Speaker 1: Let's shift from that side of the dual mandate, the

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Speaker 1: inflation side, to the employment side. How healthy is this

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Speaker 1: labor market today? What are the things that are raising

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Speaker 1: the concern of policymakers.

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Speaker 3: So the labor market is really tricky right now, right

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Speaker 3: because it is very clear that demand from employers for

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Speaker 3: workers has slowed. At the same time, though the Trump

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Speaker 3: administration has implemented stricter immigration policies, stricter immigration enforcement, and

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Speaker 3: so that is also economist think weighing on the supply

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Speaker 3: of labor. So you have both labor demand and labor

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Speaker 3: supply falling at the same time, and so that kind

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Speaker 3: of obscure the picture, right. Chirpowell has called this like

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Speaker 3: a curious kind of balance.

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Speaker 1: Here's what Powell said about that on Wednesday.

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Speaker 2: You know, typically when we say things are in balance,

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Speaker 2: that sounds good. But in this case, the balance is

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Speaker 2: because both supply and demand have come down quite sharply,

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Speaker 2: now demand coming down a little more sharply because we

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Speaker 2: now see the unemployment rate edging up.

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Speaker 3: Because both of these things are happening in tandem, it's

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Speaker 3: kind of hard to know like is the labor market

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Speaker 3: really weak or are we having a demand issue? Are

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Speaker 3: we having a supply issue? Like what is really happening?

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Speaker 3: So we have seen the pace of job creation really

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Speaker 3: slow in the final months of the summer, and we

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Speaker 3: also got revisions that suggested that the amount of job

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Speaker 3: creation in twenty twenty four and early twenty twenty five

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Speaker 3: was much weaker than originally estimated. So the numbers don't

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Speaker 3: look great, But it's kind of hard, given all the

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Speaker 3: policy changes that we've had, for policy makers to figure out, Okay,

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Speaker 3: what is actually the root cause of this weakening that

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Speaker 3: we're seeing, and so that's what's making it a little

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Speaker 3: tricky here.

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Speaker 1: You mentioned those revisions and the numbers seem huge. I

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Speaker 1: know that it's common for these numbers to be revised,

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Speaker 1: but it strikes me this has to compound the difficulty

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Speaker 1: for the FED. They're relying on jobs numbers that are

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Speaker 1: inherently backward looking, and then you have these giant revisions.

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Speaker 1: Could you talk a bit more about how what we're seeing,

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Speaker 1: or what we have seen in recent weeks is normal

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Speaker 1: or isn't.

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Speaker 4: I think what you said is exactly right.

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Speaker 3: So you talk to any economists, they're like, oh, like, yeah, revisions,

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Speaker 3: they happen all the time. These annual revisions happen annually, Right,

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Speaker 3: they happen all the time. I think the magnitude of

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Speaker 3: the revisions is what is giving people a little heartburn, right,

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Speaker 3: And it's interesting.

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Speaker 4: Lisa Cook talked about how when.

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Speaker 3: You are seeing large revisions like this, it usually is

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Speaker 3: because the economy is at an inflection point and things

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Speaker 3: are changing in a way that you have to pay

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Speaker 3: attention to. And so I think it does make the

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Speaker 3: fed's job really tricky because the data is changing, and

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Speaker 3: because so much of their calculation this year about holding

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Speaker 3: rates study was because they felt like the labor market

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Speaker 3: was giving them almost.

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Speaker 4: The luxury to do so.

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Speaker 3: Right, we are scared about tariff inflation, but we have

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Speaker 3: a good labor market, so we can afford to keep

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Speaker 3: interest rates a little high here. But now that narrative

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Speaker 3: is really being challenged by the recent reports and the revisions,

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Speaker 3: and so it kind of in a way compels them

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Speaker 3: to move. But then they're still dealing with the inflation question.

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Speaker 3: So it's all very tricky. Also to mention that President

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Speaker 3: Trump has sort of zeroed in on these numbers and

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Speaker 3: these revisions and made it a political question, kind of

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Speaker 3: accusing people of rigging the numbers to make him look bad,

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Speaker 3: as if the FED needs like another political issue to

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Speaker 3: deal with. They are making these very complicated decisions on

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Speaker 3: numbers that are now the subject of political scrutiny by

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Speaker 3: President Trump and his allies.

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Speaker 1: So the FED has made this decision. How long does

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Speaker 1: it take for the Fed to see how effective a

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Speaker 1: rate cut a rate decision is?

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Speaker 3: Yeah, I mean, the one thing that Fed policy makers

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Speaker 3: often will say is that monetary policy works with long

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Speaker 3: and variable lags, right, famous famous ques, And so there's

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Speaker 3: not like a clear cut answer to that, right, Like,

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Speaker 3: it's not the case that the FED cuts rates and

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Speaker 3: we start to.

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Speaker 4: See, you know, the economy opening up the next day.

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Speaker 3: And in some ways it's even a bigger question now

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Speaker 3: because the economy has performed in ways that have been

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Speaker 3: so surprising after the pandemic, Like even with interest rates

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Speaker 3: being in a place that most economists see us like

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Speaker 3: at least somewhat restrictive, we're still seeing consumer spending hold

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Speaker 3: up pretty well.

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Speaker 4: And so it's not an easy question to.

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Speaker 3: Answer because you just don't know how monetary policy changes

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Speaker 3: are going to filter through the economy and how quickly.

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Speaker 1: On Wednesday, FED policymakers projected there will be an additional

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Speaker 1: twenty five basis point cut by the end of the year.

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Speaker 2: The median participant projects at the appropriate level of the

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Speaker 2: federal funds rate will be three point six percent at

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Speaker 2: the end of this year, three point four percent at

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Speaker 2: the end of twenty twenty six, and three point one

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Speaker 2: percent at the end of twenty twenty seven. This path

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Speaker 2: is one quarter percentage point lower than projected in June.

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Speaker 2: As is always the case, these individual forecasts are subject

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Speaker 2: to uncertainty, and they're not a committee plan or decision.

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Speaker 2: Policy is not on a preseid course.

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Speaker 3: I think Powell and many of the policy makers don't

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Speaker 3: like to be boxed in, and so I think you

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Speaker 3: can expect them to continue to try to preserve their optionality.

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Speaker 4: Right.

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Speaker 3: Even Governor Waller, who has been pretty clear that he

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Speaker 3: wants to see rate cuts, has said, we an'll have

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Speaker 3: to be on like a predetermined sequence. We can begin

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Speaker 3: cutting and then kind of see where things go, see

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Speaker 3: how things evolve. And so I would expect Powell and

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Speaker 3: other policymakers to continue to do that, especially given this

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Speaker 3: very complicated backdrop that we've been talking about, both economically

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Speaker 3: and politically.

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Speaker 4: Why would they box themselves in?

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Speaker 1: This is the Big Take from Bloomberg News. I'm David Gerra.

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