Federal Reserve cuts interest rates by 0.25%, Powell says there’s ‘no risk-free path’

Markets reacted positively after the Fed cut interest rates by a quarter point on Wednesday.

And part of the optimism seems to be around the Fed’s outlook for the economy, which it sees growing at a 2.3% rate in 2026 after this year’s 1.7% GDP growth.

“The take on productivity and growth is very risk-friendly,” Evercore ISI’s Krishna Guha wrote in a note on Wednesday. “The Fed chair suggests productivity may be running about 2%, allowing the economy to grow faster without generating excess inflation.”

In essence, lower rates, falling inflation, and faster economic growth is a recipe for higher corporate profits, a stabilization in the labor market, and as evidenced on Wednesday, higher stock prices.

Fed officials expected to make one more rate cut next year, the same number projected in September. As of Wednesday afternoon, markets were pricing in additional rate cuts in April and June.

Guha said Powell sounded “very upbeat on productivity and growth, including AI effects,” during his press conference on Wednesday.

Adding Powell came across with a “calm rather than edgy in tone, suggesting he is comfortable and in charge rather than on the ropes as in October.”