The Federal Reserve Lowers Rates And Ends Quantitative Tightening

Market Commentary – November 3, 2025

The Federal Open Market Committee (FOMC) concluded its meeting last Wednesday, electing to lower the Fed funds rate by 25 basis points from a range of 4%–4 ½% to 3¾%–4%.

In addition, the FOMC voted to end quantitative tightening (QT) on December 1. Under QT, the Fed has been reducing its balance sheet by selling or letting Treasury and agency securities – primarily mortgage-backed securities (MBS) accumulated during the Global Financial Crisis (GFC) – mature or roll off. QT is considered a form of tightening monetary policy. Stopping QT can be considered a form of monetary easing.

In the news conference following the meeting, Fed Chair Jerome Powell said that the FOMC considers its recent cuts in rates as a move toward a more neutral policy stance to support what it sees as a labor market facing downside risks. So far, the Fed views the rise in consumer prices as a one-time effect of tariffs working their way into the economy, which is expected to continue into the spring. Powell also noted that housing costs and services were mildly deflationary. He commented that shelter inflationary costs have been coming down and are expected to continue to trend downward.

Notably, Fed Chair Powell remarked that an additional interest rate cut in December was not a foregone conclusion. As the market had largely priced in a December cut, his comment briefly jolted equities as the market readjusted its expectations. But stronger-than-expected earnings in the Tech sector helped calm investors and steady the market.

A key difference at this FOMC meeting was the presence of two dissents from the consensus. Stephen Miran, appointed by President Trump to a term ending in January, favored a 50-basis-point cut, while St. Louis Fed President Jeffrey Schmid preferred no change. In response to questions, Powell said that FOMC members each had different projections for economic activity, different levels of risk aversion, and distinct views on how to properly respond to those risks. It is rare to have dissents that have opposing views.

The S&P 500 Reached New All-Time Highs Again

The S&P 500 set yet another all-time high last week, and closed higher than the previous week, as it has for 7 of the past 9 weeks, dating back to Labor Day. What’s behind this streak? Multiple factors, including: two 25-basis-point cuts in interest rates; solid corporate earnings announced during the first half of Q3 earnings season; the confluence of further investment in AI and data centers. Together, these factors have strengthened investor confidence and expectations for continued solid corporate performance in the coming quarters. Meanwhile, Amazon, Meta, and Microsoft (in alliance with OpenAI) have announced $440 billion in data center investment in the next 12 months. The Stargate project, involving OpenAI, Softbank, and Oracle, has announced an investment of up to $500 billion by 2030. Earlier this year, McKinsey estimated a total investment of $7 trillion by 2030 in the overall build-out of data centers, “a staggering amount by any measure.”