Fed Blinks Again as Growth Cools, Gold Nears $3,700

The Federal Open Market Committee (FOMC) trimmed its policy rate by 25 basis points yesterday, acknowledging that U.S. growth has “moderated” and job creation is sputtering even as prices keep climbing. The new 4.00 – 4.25 percent target range marks the third cut of 2025 and arrives with inflation still “somewhat elevated,” hardly a confidence-inspiring mix for households already grappling with rising living costs. Ten voting members, including Chair Jerome Powell, approved the move; Governor Stephen I. Miran, Trump’s latest appointee, dissented in favor of a deeper 50-basis-point slice, arguing that downside risks to employment outweigh the hazards of easier money.

The statement’s twin admissions—flagging labor momentum and sticky inflation—underscore the policy bind. Payroll gains have slowed and unemployment has inched higher, yet the Fed is still missing its vaunted 2 percent inflation objective. “Uncertainty about the economic outlook remains elevated,” the Committee conceded, promising to remain “data dependent.” Critics of the central bank’s stop-and-go strategy note that real yields are again drifting below headline inflation, a recipe that historically erodes purchasing power and sends capital in search of sturdier ground.

Operational tweaks accompanied the headline cut. Effective September 18, interest on reserve balances fell to 4.15 percent, and the primary-credit (discount) rate slid to 4.25 percent. The New York Fed’s trading desk will keep the effective fed funds rate inside the new band, aided by standing overnight repo facilities set at a minimum 4.25 percent with a hefty $500 billion aggregate cap. Reverse-repo offerings sit at 4.00 percent, capped at $160 billion per counterparty. While Quantitative Tightening technically endures—Treasury roll-offs are limited to a mere $5 billion monthly—critics point out that such modest run-off, paired with open-ended liquidity backstops, hardly constitutes genuine balance-sheet discipline.…