4 key takeaways from Powell as the Fed cuts interest rates

• The Fed cut its benchmark interest rate by 25 basis points on Wednesday.
• The meeting featured the most dissent among officials since 2019.
• Here are the top takeaways from the latest Fed decision.

The Fed cut interest rates for the third time this year on Wednesday, and the meeting held some key takeaways for how the central bank is thinking about the economy heading into 2026.

From the labor market to inflation to stocks, here's everything to know about the latest Fed decision.

Job market

Fed leaders anticipate more economic growth in 2026 and stable unemployment levels, but are somewhat concerned about slowing labor demand and participation. Lower rates could help juice hiring, Powell said.

In terms of AI, the Fed chair said chatbots are not yet replacing jobs — even as Corporate America sees shrinking while collar roles. "It's part of the story, but it's not a big part of the story yet," he said. And, though some Big Tech firms and major retailers, have had high-profile cuts in 2025, Powell added that overall layoff rates are still relatively low.

Inflation

The figure remains slightly above the Fed's 2% goal, though data is limited due to the government shutdown. With lower rates, there's a risk consumer prices will rise too. At the same time, Powell said consumer spending has been strong and the main driver of inflation right now is tariff policy, not broad economic weakness.

Markets

It was a hawkish rate cut overall, but markets rallied sharply anyway.

The S&P 500 edged up to a near-record close and the Dow jump almost 500 points, adding to gains as Powell's press conference got going. A few things came out of the meeting that boosted investors' bullishness.

• The Fed's purchases of short-dated bonds should help keep a lid on yields and boost the appeal of equities.
• Powell indicated that a rate hike isn't the base case in the foreseeable future. Markets have been sensitive to how inflation could impact the outlook for rates, and investors welcomed the Fed chief's view.
• Emphasis on the labor market hinted that, despite dissent among Fed officials, the focus would remain on strengthening the economy rather than fighting inflation.

Future of the Fed

With Powell's term up in May, Trump is set to name a successor in January.

"I really want to turn this job over to whoever replaces me with the economy in really good shape," he said. "I want inflation to be back down to 2% and I want the labor market to be strong — that's what I want. All of my efforts are to get to that place."

Members of the Federal Open Market Committee showed significant division on Wednesday, with three members dissenting to the cut call. It's the biggest split seen at a Fed meeting since 2019 and signals ongoing tension between the Fed's dual mandate and how each member weighs employment and inflation risks.

Powell, however, said there's no bad blood.

"The discussions we have are as good as any we've had in my 14 years at the Fed," he said. "They're very thoughtful and respectful and people have strong views