Hawkisk cut

Last Wednesday, the US Federal Reserve (Fed) cut its benchmark rate by 25 basis points to a range of 3.50 to 3.75 percent.

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The Fed’s policy statement struck a relatively hawkish tone and the dot plot signaled a tempered view for future rate cuts. Conversely, the Fed announced that ithas initiated a bond-buying program despite the hawkish cut.Rate cut with hawkish guidance

The phrase “hawkish cut” may sound like an oxymoron composed of two contradicting words. However, in this context, market pundits use the phrase to describe a policy rate cut which is accompanied by hawkish forward guidance. This comes as a pivot after the Fed reduced its policy rate by 75 basis points since September and 175 basis points since September last year. The dot plot indicates that Fed officials expect just one more rate cut in 2026 and another one in 2027. In addition, two committee members voted against the rate cut, while four other nonvoting members expressed soft dissents against the move.

Wait-and-see

Fed Chair Jerome Powell's statement underscored the Fed’s wait-and-see approach as it is less inclined to cut rates again in the near-term. Below, we share some quotes from his speech and Q&A session.

• “The Fed funds rate is now within a broad range of estimates of its neutral value and we are well positioned to wait and see how the economy evolves.”