Fed Cuts Rates; Trump May Replace Powell

On Oct. 29 the Federal Reserve cut the federal funds rate by 25 basis points to 3.75%–4.00% and said it will stop shrinking its balance sheet to ease policy amid elevated inflation and a softer labor market. Chair Jerome Powell repeatedly hedged at the post-meeting press conference that a December cut is "far from a foregone conclusion," reflecting committee dissent and a data-dependent approach. Markets reacted unevenly, with the S&P 500 holding gains while small caps lagged and short-term Treasury yields rose after Powell’s remarks. A partial U.S. government shutdown has delayed key economic releases — including jobs and potentially inflation data — complicating the Fed’s data-dependent outlook. President Trump has intensified pressure on Powell and is reportedly preparing to replace him, with a five-person shortlist under consideration that includes Fed Governors Christopher Waller and Michelle Bowman, former Fed official Kevin Warsh, National Economic Council Director Kevin Hassett and BlackRock CIO Rick Rieder. Powell says he will serve out his term (his board term runs to 2028), and any nominee would require Senate confirmation amid investor concerns about political influence on the central bank.