The Fed is sending more dovish signals than the market anticipated - analysts observe dominant dovish tones

Market expectations on Wall Street, which assumed a decisive hawkish stance from the Fed, were shattered by the reality of a much more moderate policy. During the latest Federal Open Market Committee meeting, interest rates were cut by 25 basis points, but the accompanying statements and data paint a picture of a central bank cautiously balancing between supporting growth and controlling inflation.

How reality differs from expectations

The market has become accustomed to reading between the lines of the Fed’s decisions, but this time the lines were noticeably more dovish. The absence of an elevated dot plot, at least two dissenting votes ( instead of the expected more ), and the lack of hawkish rhetoric from Powell all show an institution approaching further actions more cautiously.

A particularly significant fact is that the Fed formally resumed its Treasury securities purchase program for a total of $40 billion, with operations starting within 48 hours. For the first time since 2020, the issue of liquidity stability has appeared directly in an official policy statement — a signal sent by an institution concerned about potential disruptions in financial markets.

What data and forecasts say

Anna Wong, Bloomberg’s chief economist, interprets the situation as clearly dovish despite some hawkish elements in the details. The committee notes an increase in optimism about economic growth while softening inflation outlooks. Wong forecasts rate cuts of 100 basis points over the next year — significantly more than the 25 basis points suggested by the dot plot itself.

David Mericle from Goldman Sachs observed subtle hawkish tones in the decision — for example, six committee members expressed reservations about maintaining current rate levels. However, he points out that the fact that the program of asset purchases was resumed directly in the statement is an unusual practice, indicating a priority on system stability.

Mike Cahill highlighted the labor market forecast — maintaining unemployment expectations for Q4 at 4.5% while the current rate is 4.44% suggests a change in the pace of the employment situation development.

Experts’ doubts about broader strategy

Ira Jersey from Bloomberg questioned the long-term reserve management strategy. He believes the Fed should consider temporary open market operations instead of permanent programs — a more flexible approach to currency swaps and other instruments could better adapt to changing market conditions.

Matthew Luzzetti from Deutsche Bank expects clarifications on whether policymakers considered delayed employment data expected next week.

Raphael Thuin from Tikehau Capital points out a fundamental problem — limited transparency of data forces the Fed to seek a balance between signals of labor market weakness and inflation-fighting requirements. The result is increasing policy uncertainty, which could drive market volatility throughout 2026.

Leadership change as an additional source of complexity

The prospect of a new Fed chair emerges as a significant risk factor. Jim Bianco from Bianco Research notes that the new leader may be perceived as someone implementing a political agenda — any subsequent increase in the diversity of views within the FOMC could be interpreted as a political move.

Seema Shah from Principal Asset Management observes that given the gaps in recent economic data and discrepancies in estimates of the neutral interest rate, it is hard to imagine a scenario where the Fed would have enough confidence to make unanimous decisions. Her forecast indicates a cautious, slow process of assessment, with the Fed observing delayed effects of previous tightening.

Richard Flynn from Charles Schwab UK describes the Fed’s earlier actions as a cautious signal amid rising risks in the context of a global slowdown. For investors, this is more of a gentle correction than a drastic turn — although rate cuts could support risky assets, volatility may remain elevated, especially as the market processes implications for future policy and broader economic prospects.