Fed Cuts Rates, Will Replace Maturing Bonds With T‑Bills

The Federal Reserve cut its policy rate by 25 basis points to a 3.75%–4.00% range amid a government shutdown that has created a data blackout and amid signs the labor market is softening. Chair Jerome Powell said officials remain divided and a December rate cut is not guaranteed, with some FOMC members warning too much easing could rekindle inflation while others point to downside risks to employment. Policymakers said they will continue shrinking mortgage-backed securities holdings and will begin replacing maturing Treasury bonds with short-term Treasury bills starting in December as overnight funding signals show banks have less excess cash. Markets had largely priced in further cuts and stocks rose, but traders and commentators cautioned against expecting large moves given persistent core/services inflation near 3% and delayed key jobs data that could be needed before additional easing.