Weekly Buzz: The Fed delivered one more cut before Christmas

The Federal Reserve (Fed) just delivered its third interest rate cut of the year, trimming rates by 0.25% to a range of 3.5% to 3.75%. Markets expected it: the job market has weakened and borrowing rates are sitting high for an economy that looks to be cooling. What they didn’t expect was just how divided the Fed had become.

What comes after the cut

Three Fed officials dissented, with some wanting to hold steady and one pushing for a larger cut. It's rare to see this level of disagreement within the central bank, and it reflects a tension at the heart of US monetary policy right now: a weakening job market pulling one way, stubborn inflation pulling the other.

Chairman Powell acknowledged it was a close call. Inflation remains at 2.8%, well above the Fed's 2% target, with tariffs taking much of the blame. Meanwhile, unemployment has crept up to 4.4%, and Powell suggested that recent payroll numbers might be overstating job growth in the US.

So what comes next? The central bank is debating where the "neutral rate" sits – the level where interest rates neither stimulate nor restrict economic activity. Powell believes they're already close, which raises the bar for future cuts. The central bank's latest projections pencil in just one more cut for 2026.

What does this mean for you?

The Fed has brought interest rates down meaningfully this year, which should be stimulative for both businesses and consumers. Now it wants to see how the economy responds before committing to more. With Powell's term ending in May next year and President Trump eyeing a more dovish successor, future cuts will hinge on both the data and whoever takes the chair.

Investor’s Corner: What if you could see tomorrow's news?

If you knew tomorrow's headlines today, you'd make a fortune. At least, that's the assumption. Investment firm Elm Partners put that to the test: they gave 118 finance students actual front pages of The Wall Street Journal, 36 hours before publication. Armed with foresight, the students traded stocks and bonds with real money on the line.

The results? Half lost money, one in six went bust, and the average gain was $1.62 on a $50 stake. Even with perfect information, their prediction accuracy was barely better than a coin flip at 51.5%.

Accuracy wasn't the real issue: it was how these students sized their bets. Overconfident in their reading of the news, many increased their leverage to 50 times their exposure, and applied the same leverage whether or not things were ambiguous. One wrong move, and they were wiped out.

Five seasoned traders also took the challenge, and all five finished profitable. The difference wasn't better predictions – they simply didn't let every headline dictate their decisions.

The takeaway is this: information matters, but discipline matters more. Markets reward patience and process, not prediction. You don't need to see the future to build wealth. The habits that build wealth are already consistent: tuning out the noise, building a diversified portfolio, and staying invested.

(General Investing is an easy way to get started with a diversified portfolio focused on the long term.)

These articles were written in collaboration with Finimize.

Simply Finance: Leverage

Leverage means using borrowed money to control a larger investment. In margin trading, for example, a broker may lend funds to an investor so $100 controls $1,000 worth of assets. This magnifies returns: a 5% gain becomes 50%. It also magnifies losses. If prices fall far enough, the investor loses their entire stake and still owes what was borrowed.