The Fed
As expected, the Fed cut rates by 25 basis points (bps) this week, the third consecutive cut since September, bringing the federal funds rate to 3.50%–3.75%. The FOMC (Federal Open Market Committee) cited downside risks to employment as the labor market continues to cool, even as inflation remains somewhat elevated. The decision was notably divided, with three dissenting votes. Fed Governor Stephen Miran again favored a larger 50 bps cut, while Kansas City Fed President Jeffrey Schmid and Chicago Fed President Austan Goolsbee preferred no cut at all. The updated Summary of Economic Projections also highlighted a growing dispersion of views. While the median participant still sees one cut next year, seven officials expect no further easing in 2026. Fed Chairman Jerome Powell described the decision as a “close call,” underscoring the tension between the two sides of the dual mandate. Policymakers broadly agree that inflation remains too high and that labor market conditions have softened but differ on how to balance these risks. He reiterated that “policy is not on a preset course,” and that future moves will depend on how the data evolve.
Our Take: While the Fed delivered another rate cut, the overall tone was more cautious. With policy now near neutral and substantial easing already in place, the committee appears increasingly inclined to step back and assess how the economy responds. Without a meaningful shift in inflation or employment, the Fed seems poised for a pause heading into the new year.
Employment
The Bureau of Labor Statistics (BLS) released the September and October Job Openings and Labor Turnover Surveys (JOLTS), and the data for both months indicated a slight pickup in job openings and steady rates of layoffs and quits at a low level.
Our Take:The release of the data was delayed by the shutdown, so the information is a little bit stale. However, this release did support the Fed’s assessment of a softer but still balanced labor market.
Municipals
Chicago Mayor Brandon Johnson and some City Council members remain at odds over the mayor’s corporate head tax proposal. Originally, Mayor Johnson proposed a $21 per employee per month tax for companies with 100 or more employees. Mayor Johnson’s latest proposal calls for a $33 per employee per month tax for companies with 500 or more employees. The new head tax plan is expected to raise $82 million, less than the $100 million originally proposed. Certain City Council members are opposed to any corporate head tax within the budget. The budget deadline of December 31 is approaching and, without a passed budget, a disruption in services could occur.
Our Take: Mayor Johnson and lawmakers have a few short weeks to close the approximately $1.2 billion budget deficit and finalize the budget before the deadline. The latest head tax proposal would affect 175 companies according to Johnson, fewer than the original plan. A group of lawmakers have been working on a plan to generate additional revenue without a head tax. Spending cuts are also on the table. Businesses and taxpayers will be following the budget talks closely as the deadline approaches.