Trump slams Fed's third-straight rate cut as 'too small,' saying he wishes it was twice as large

The Federal Reserve cut its policy rate by 25 basis points for the third consecutive meeting to about 3.6% and signaled it may hold rates steady in the near term, with officials' quarterly projections pointing to just one cut next year; markets rallied on the move (S&P 500 +0.7%). Chair Jerome Powell said the rate is close to neutral and emphasized the need to assess incoming data amid signs of labor‑market weakness—officials noted payrolls have averaged only about 40,000 jobs a month since April and could be revised lower—while inflation remains above target. The decision exposed deep committee divisions (three dissents, the most in six years) and a wide range of 2026 rate paths among Fed members, and it comes as political pressure mounts from President Trump, who has criticized the cut as too small and may nominate a successor likely to favor sharper reductions.

Analysis

The Federal Reserve cut its policy rate by 25 basis points to about 3.6% — the third consecutive reduction — but signaled a pause ahead, with Fed officials’ quarterly projections showing just one further cut next year after six cuts over the past two years. Chair Jerome Powell described the current rate as close to neutral, marking a shift from earlier characterization that rates were restrictive, and emphasized the committee will “carefully evaluate the incoming data.”

Markets responded positively with the S&P 500 rising 0.7% and closing near its October record, but the decision exposed pronounced committee discord: three dissenting votes (the most in six years) and a wide dispersion in 2026 rate paths (seven members penciled no cuts, eight saw two-plus cuts). Political pressure is rising as President Trump criticized the move and may nominate a successor likely to favor steeper reductions.

The Fed explicitly cited labor-market downside risks despite headline payrolls averaging 40,000 per month since April and warned payroll data could be revised lower by as much as 60,000 — implying a possible net job loss trend — while unemployment has risen to 4.4%. Inflation remains above target (PCE 2.8% year-over-year in September) and Powell flagged risks of tariff-driven price rises early next year, keeping the balance between further easing and inflation vigilance uncertain.

Absent clear, sustained disinflation or meaningful labor-market deterioration, the bar for additional cuts is higher, making near-term policy dependent on monthly labor and PCE prints and on political developments around Fed leadership.

Key Decisions for Investors

• Monitor monthly payrolls and the Fed-preferred PCE inflation prints closely and avoid increasing risk ahead of these data releases
• Trim duration in fixed-income allocations or favor shorter-maturity instruments given a higher bar for further rate cuts and the risk that rates remain near neutral
• Consider selective equity exposure to areas Powell highlighted—consumer-resilient names and firms investing in AI infrastructure—while keeping position sizes manageable after the recent rally
• Establish or maintain hedges (options or macro overlays) into December and around any Fed chair nomination, as political pressure for sharper cuts could produce abrupt policy-shift risk
• Maintain some allocation to inflation-sensitive assets or strategies as tariff pass-throughs and persistent underlying price levels pose upside inflation risk next year