Today's rate cut made history: This marks the first Fed interest rate cut with Core PCE inflation at 2.9%+ in 30+ years. The decision was CLEARLY driven by the labor market portion of the Fed's "dual mandate." The labor market is simply too weak, even as inflation has risen.

Today's meeting was also important as it came with the update Fed "dot-plot." This shows where Fed officials see interest rates moving, as shown below per ZeroHedge. The median projection showed an additional 50 basis points of interest rate cuts before the end of 2025.

As noted above, there was one clear outlier in the data. This was Stephen Miran, a recent Trump appointee, who dissented the decision to cut by 25 bps in support of a 50 bps cut today. As seen in the dot-plot, the Fed appears to be very divided as we look ahead.

In fact, this is the most divided we have seen the Fed in a very long time. 9 out of 19 Fed officials see 2 more interest rate cuts in 2025. Meanwhile, 6 out of 19 see no more interest rate cuts in 2025. This is a massive divergence with just 2 Fed meeting left this year.

The Fed also updated their economic projections. While they see PCE inflation moderating, their 2026 forecast was raised from 2.4% to 2.6%. Meanwhile, unemployment is expected to remain in the 4.3% to 4.5% range. It's clear we are trending toward stagflation.

The market knows that the Fed will now be prioritizing the labor market over inflation. As a result, the market now sees a base case of 4 MORE rate cuts by September 2026. Again, this is a historic pace of rate reductions into inflation, a situation almost never seen before.

The Fed is now officially cutting rates with the S&P 500 at a record high. The last 20 times this happened, the S&P 500 rose an average of +13.9% over the next 12 months, per Carson. Near-term volatility will persist, with 50% of cases resulting in negative 1-month returns.

What about the housing market? Heading into this rate cut, homebuyer demand hit its 2nd lowest level on record, near the 2009 low. But, what's interesting is that rates have already dropped in anticipation of today. This was priced-in, yet demand remains historically weak.

If the Fed wants relief in the house market, here's what needs to happen: Mortgage rates would need to drop enough to incentivize the 55%+ of homeowners with <4% rates to move. Otherwise, the result will be ~5% mortgages with somewhat higher demand, but still limited supply.

Powell was asked on cutting rates with stocks at record highs and a "potential bubble." Powell said he is "focused" on containing inflation and unemployment, not the stock market. As we have said for months, asset owners will reap the rewards of this new era of fiscal policy.

Above 2% inflation is being met with rate cuts. As a result, the economy is shifting and its implications on stocks, commodities, bonds, and crypto are investable. Want to receive our premium analysis? Subscribe to access our premium analysis below: http://thekobeissiletter.com/s...

Lastly, Powell concluded with a similar statement as July. "Risks to inflation are tilted to the upside, and risks to employment are tilted to the downside, a challenging situation." Sounds like stagflation. Follow us @KobeissiLetter for real time analysis as this develops.

@KobeissiLetter Love these updates and your content. Would you mind expanding your commentary on the U.S. dollar weakening?

@A1MisterCarter If there is enough interest, we can make a thread on this.

@KobeissiLetter

@TrendSpider Perfect summary.

@KobeissiLetter "What's coming next?" - Powell says he doesn't know

@stockdatamarket Powell on the economy: "No one really knows where the economy will be in three years."

@KobeissiLetter Do you manage risk? Or is this just a commentay account?

@JunK_OperatoR Risk management is 50% of our investment strategy.

@KobeissiLetter Quite helpful and useful. Thanks.

@cbress21 Thank you for reading and following.

@KobeissiLetter Thanks for the breakdown!! Still very confused what will happen to the stock market. Half say up and half say down!!

@callumgowar03 History says the S&P 500 ends +15% higher 12 months from now.

@KobeissiLetter @grok Give it to me in 5 words

@KobeissiLetter Why rate cut? 👉 3% Inflation in the US is Now Normal Inflation! A 3% inflation rate is seen as the new baseline due to supply chain issues, energy costs, and wage pressures. This shift from the 2% target supports steady growth while avoiding deflationary risks. 👉 Trump Wants

@KobeissiLetter The dollar bounced back up and even higher on the day by end of trading. As I said in your other thread: 1. Cuts were already calculated into the dollar price. 2. Lower bonds and better economic output will strengthen the dollar in the end. — And I’d like to add to all of

@KobeissiLetter He also clarified that inflation is moderated vs some expectations bc importers of record absorbing more share of tariffs vs pure consumer pass-through many leftists have been hyperventilating and prognosticating over, including YOU, @KobeissiLetter

@KobeissiLetter Stop robbing us tax payers and lower the damn rate where it should be

@KobeissiLetter It should be a .50 rate cut and two more .50 rate cut before year end. Jerome Powell sucks.

@KobeissiLetter It could have been tenth if not for the too late guy