Fed Signals Rate Cut Pause Amid Sticky Inflation

Federal Reserve Chair Jerome Powell signaled a pause in anticipated interest-rate cuts, emphasizing that policy easing won't resume until inflation sustainably reaches the central bank's 2% target. Speaking after the latest FOMC meeting, Powell highlighted persistent pressures in service-sector prices, which have kept core inflation elevated despite cooling in goods. This stance marks a hawkish pivot from prior hints of near-term relief, dashing hopes for cuts as early as mid-2025.

Markets reacted sharply to the comments, with the S&P 500 falling 1.5% and the Nasdaq Composite dropping over 2%, dragging down trackers like SPY and QQQ. Growth stocks, particularly in technology, bore the brunt of the selloff as higher-for-longer rates erode their valuations. Expectations for 2026 easing have now been pushed further out, with futures pricing in fewer than two quarter-point reductions next year, upending investor bets on a soft landing.

The shift underscores the Fed's prioritization of price stability amid sticky inflation data, potentially prolonging tighter financial conditions and weighing on economic growth. Traders on X have voiced frustration over the "Fed pivot fail," with macro accounts flagging elevated recession risks if borrowing costs remain restrictive. Key items to watch include upcoming CPI releases, labor market reports, and Powell's next public remarks, which could either reinforce the pause or signal flexibility if disinflation accelerates.