1️⃣ The Federal Reserve made a cautious concession. After months of mixed signals, the Federal Open Market Committee (FOMC) cut interest rates by 25 basis points to 3.75%-4.00%, acknowledging that the labor market was finally beginning to cool, while inflation was quietly picking up. The message was not panic, but balance. Policymakers acknowledged that even though inflation remained “slightly high,” downside risks to employment were rising. This was essentially the central bank’s subtle way of saying: we cannot risk damaging the labor market to chase a decimal point of inflation. 2️⃣ An even more significant event was the balance sheet. Starting December 1st, the Fed will end its quantitative tightening policy and transfer the principal of all agency bonds and mortgage-backed securities (MBS) to short-term Treasury securities. This is a covert liquidity enhancement measure—reducing duration consumption and increasing short-term cash reserves. The end of quantitative tightening is significant beyond the 25 basis points on the surface; it marks a shift in policy focus from tightening to risk management. Milan wants a 50 basis point rate cut, while Schmid prefers to keep rates unchanged, indicating significant disagreement and Powell carefully weighing the pros and cons. 3️⃣ Market Interpretation: This is not a "pivot point," but a precautionary measure. Liquidity is recovering, but the Fed retains the option to pause rate hikes if inflation remains low. Short-term interest rates and Treasury bills will benefit first; the credit and stock markets welcome this signal but will test it with actual data. The Fed's message is: the economic cycle continues, but we can no longer pretend we're back to 2022. Risk management is the new tightening policy. #