The first part of last week’s Fed meeting on interest rates went largely as expected, with no major surprises. The central bank cut rates by 25 basis points, bringing them to a range of 3.75% to 4%. The quantitative tightening (QT) program is set to end on December 1, a move widely anticipated given the growing tensions in the money markets. In short, quantitative easing (QE) is on the horizon.
Yet, neither the S&P 500 nor XAUUSD cheered, and U.S. Treasury yields even rose. And the reason for that lies in the second part of the meeting — specifically, the comments from Fed Chairman Jerome Powell. While not entirely hawkish, his statements tempered expectations for another 25 basis point cut at the December meeting.
Powell highlighted “very divergent views on how to proceed”: some members favor lowering rates, while others prefer to pause. This uncertainty likely reflects the mounting risks on both fronts—rising inflation and unemployment — forcing the Fed to act cautiously. Compounding this is the current government shutdown, which limits the availability of key data, further reinforcing the need for prudence.
The meeting between U.S. and Chinese leaders was expected to bring the two countries closer to ending the trade war, easing inflationary pressures, and potentially encouraging the Fed to adopt a more moderate stance. In reality, however, the outcome was disappointing: most concessions were limited to reversing recent measures. Tariffs remain high, sensitive issues remain unresolved, and there are no guarantees that any agreement will hold. As a result, markets reacted cautiously, as expected.
Could anything change this Wednesday?
On November 5, the U.S. Supreme Court will hear arguments on whether former President Trump exceeded his authority in imposing tariffs under the IEEPA.
If the ruling goes against the former president, nearly $100 billion in tariffs collected over the past seven months could need to be refunded, not including potential additional compensation to affected businesses. For a federal budget already deeply in deficit, this would be unwelcome news. However, it remains unclear how long the Court will take to reach a decision.
Importantly, even if the Supreme Court rules against Trump, Treasury Secretary Scott Bessent noted that the administration could rely on other tariff authorities. Section 122 of the Trade Act of 1974 allows for the imposition of general tariffs of 15% for 150 days to correct trade imbalances, and Section 338 of the Tariff Act of 1930 could also be invoked.
Thus, it’s unlikely that the trade wars will end anytime soon, meaning the Fed’s decision-making process will remain challenging.