Fed Blinks Again as Growth Cools, Gold Nears $3,700 | SchiffGold
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.
Miran’s vote highlights a growing and inflationary rift inside the Board. With growth already cooling, he argued, a shallow trim may merely delay the inevitable sharper easing later. Other officials, including Vice Chair Philip Jefferson and Governor Michelle Bowman, preferred the incremental approach, insisting that a larger move risked inflaming prices further. Skeptics counter that the Fed’s “slow-walk” simply feeds uncertainty: either inflation is under control, or it isn’t—half-measures please neither side of the debate.
Gold traders appear to have voiced their opinion. The yellow metal punched up to $3,695 an ounce on Wednesday, moving within a tight $44.5 span but holding near record territory as the policy announcement crossed the wires. With growth fading, inflation lingering, and the Fed once again loosening the spigot, markets are left to ponder which mandate—stability of prices or full employment—will falter next.
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