The Fed's entering its unknown era, and that's bad news for investors

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The Federal Reserve did what everyone thought it would do. Don't get used to it.

The central bank cut rates for the third time this year. BI's economy team broke down the announcement and answered your questions. BI's Allie Kelly also has a recap on what the latest rate cut means for your wallet along with some key takeaways.

Fed Chair Jerome Powell called his shot roughly a year ago when he projected three rate cuts in 2025.

Love him or hate him, that type of consistency and transparency has been a staple of Powell's tenure. Rarely, if ever, has there been real uncertainty about what the Fed would do in the immediate run-up to a rate-cut meeting.

But differing views on managing the Fed's two biggest mandates — keeping inflation low and maximizing employment — and an upcoming change in leadership mean a lot less certainty going forward.

That was on display yesterday, as there were three dissenting votes, the most in over six years. The split was also widespread, with Stephen Miran preferring a big cut while Austan Goolsbee and Jeffrey Schmid voted against dropping rates entirely.

The Fed's latest "dot plot" is projecting one cut next year, but individual opinions on how the next 12 months could shake out vary greatly. Last meeting's dot plot was also all over the place.

That could become the new norm at the Fed. Powell's term ends this May, and President Donald Trump could name his replacement pick before Christmas.

The favorite to replace Powell is National Economic Council director Kevin Hassett, a Trump ally who has been vocal about aggressively slashing rates. That's got some investors nervous — and previously sent bond yields spiking — over fears Hassett would cut rates even in the face of rising inflation.

Investors have some tricks up their sleeve to counteract the potential for an unconventional Fed.

So-called "bond vigilantes" have been known to fight monetary policies or fiscal budget decisions they disagree with. They sell bonds, which sends yields spiking and ultimately increases borrowing costs.

Trump is hyper-aware of market reactions to his choices, which gives investors some power. The TACO trade — Trump Always Chickens Out — was all the rage as tariffs ramped up.

Even if investors have levers they can pull to reel in the Fed, that type of constant back-and-forth is not ideal for the bond market.

Volatility has become a staple of the stock market, but the bond market is supposed to represent stability and security. That'll be tough to maintain if it turns into a battleground between investors and the central bank.