The Fed Just Confirmed the Money Printing Pivot!

The Federal Reserve cut interest rates and ended quantitative tightening, signaling a pivot toward potential future money printing and inflation, despite differing views on future rate cuts and data uncertainty.

• Federal Reserve cut rates and ended quantitative tightening, signaling a future pivot to money printing and potential inflation.

• December rate cut is uncertain due to internal committee disagreements and government shutdown's impact on data availability.

• Consumers remain unhappy about sustained higher prices, expecting a long recovery for real incomes to catch up.

The Federal Reserve concluded its latest meeting by cutting interest rates by a quarter point to 4.0% and, more significantly, announcing the end of quantitative tightening as of December 1st. This move is interpreted as a precursor to future money printing, potentially in 2026, which is expected to reignite inflation. Federal Reserve Chair Jay Powell indicated that a further rate cut in December is not a 'foregone conclusion,' citing internal committee disagreements and concerns about data availability due to a government shutdown.

Fed Rate Cut & QT End

• 00:00:00 The Federal Reserve has cut interest rates by a quarter point, bringing the Fed Funds rate to 4.0%. Crucially, the committee also announced the conclusion of the reduction of its aggregate securities holdings on December 1st, effectively ending quantitative tightening or balance sheet runoff. This sequence of rate cuts followed by ending tightening is seen as paving the way for future money printing, potentially trillions of dollars by 2026, which is anticipated to cause inflation to 'come roaring back.'

Uncertainty for December Rates

• 00:01:27 Despite market expectations, Federal Reserve Chair Jay Powell stated that a further reduction in the policy rate at the December meeting is 'not a foregone conclusion.' There were strongly differing views within the committee on whether to cut rates again, with some participants believing current rates are sufficient. The committee is data-dependent, but a government shutdown has limited access to labor market data, which may lead to a more cautious approach in December, like 'driving in the fog.'

Commitment to 2% Inflation

• 00:07:33 The Federal Reserve remains 'absolutely committed' to returning inflation to its 2% target, asserting this as a 'credible commitment.' Regarding 'tariff inflation,' Powell expects it to continue but remain 'moderate and transitory,' gradually increasing and then plateauing. These tariff effects, which are not considered 'big increases' overall, are anticipated to work their way through the economy into the spring, eventually allowing measured inflation to return to non-tariff levels near 2%.

Money Printing & Consumer Unhappiness

• 00:09:55 Powell confirmed the Fed is entering a new phase: stopping money tightening and then pausing before eventually moving to money printing. This pause is expected to last 'for a time,' with the implicit understanding that printing will commence if a financial system 'breaks.' Powell acknowledged that consumers are unhappy about inflation, not just current price increases but the cumulative higher prices from inflation in previous years, and that it will take 'quite some time' for real incomes to catch up and alleviate this sentiment.