Here are five key takeaways from the Fed’s big interest rate decision

The Federal Reserve on Wednesday delivered on a widely anticipated quarter percentage point interest rate cut that will take its benchmark down to a target range of 4%-4.25%, its lowest in nearly three years. In addition, the central bank’s Federal Open Market Committee provided signals of what’s down the road.

Here are five key takeaways from the meeting along with Chair Jerome Powell’s news conference:

1. While the rate reduction was no surprise, there was plenty of intrigue over what the “dot plot” of individual members’ expectations would show for the future. The upshot: Two more cuts this year, another in 2026 and one more in 2027, all of which would take the funds rate down to around 3%, which the median forecast of the committee sees as “neutral.”
2. Markets weren’t sure what to make of it all. An initial rally on the Dow Jones Industrial Average lost a little steam but the blue-chip index still closed up 260 points. However, the S&P 500 and Nasdaq both posted losses. In the Treasury market, yields were lower on the short end but higher for longer maturities, a potential problem for the Fed as it tries to avoid stagflation.
3. At least some of the confusion may have come from Powell characterizing the rate move as a “risk management” cut. On top of that, while the FOMC indicated a rapid pace of cutting this year, with moves at the two remaining meetings in October and December, it anticipates just one reduction in each of the next two years and no cuts in 2028. The mix between dovishness and hawkishness left markets queasy.
4. The meeting began with a strong whiff of politics as new Governor Stephen Miran attended his first meeting after being sworn in Tuesday. However, Powell gave little indication of tension in the air. “The only way for any voter to really move things around is to be incredibly persuasive, and the only way to do that in the context in which we work is to make really strong arguments based on the data and understanding of the economy. That’s really all that matters, and that’s how it’s going to work,” the chair said.
5. While Miran was the only member to cast a vote against the cut, in favor of a larger half-point move, the dot plot showed a wide disparity among officials’ views, underscoring a challenging policy path ahead. Those wanting just one more cut this year lost narrowly, by a 10-9 margin, against those looking for two. Future years also showed a wide distribution of potential outcomes.