Charts of the Week: The Fed's Current Predicament
The data behind the Fed's "risk management cut" to rates
Every Friday, I’ll share charts that highlight key insights into the current state of the economy or financial markets. Commentary will be minimal—I aim to let the charts speak for themselves and serve as a starting point for discussion. Facts are facts, but interpretations can vary.
Disinflation has stalled.
The majority of FOMC members think inflation will remain above the 2% target through 20271
They also see unemployment rising above the current 4.3% in August 20252
This puts the Fed between a rock and a hard place as they manage their dual mandate—controlling inflation and unemployment
The Fed cut rates by 25bps this week to a range of 4.00-4.25% and according to the dot plot, 9 voting members are forecasting a 3.50-3.75% target range by the end of the year.
The market is expecting the same.
Why did the Fed cut when its own projections point to a prolonged period of higher inflation? It framed the move as a “risk-management cut”—meaning, like any prudent risk manager, it will continue to reassess. The market, however, isn’t pricing in any reversal.
https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20250917.pdf
https://www.bls.gov/news.release/pdf/empsit.pdf
Sources: Federal Reserve, CME Group
Great charts and commentary! Do you think the labor market slowdown was enough to warrant a rate cut, or did the Fed cut because of political pressure?