Trump, Markets Got the Fed Rate Cut They Wanted. Why Both May Become Disappointed.

Federal Reserve Chair Jerome Powell (Chip Somodevilla/Getty Images)

President Donald Trump had better things to do on Wednesday than criticize Federal Reserve Chair Jerome Powell—the U.S. leader was attending a lavish U.K. state banquet hosted by King Charles III.

But as the 160 guests at Windsor Castle tucked into their watercress panna cotta and chicken ballotine, investors also had plenty to digest following the central bank’s first interest-rate cut of 2025.

The Fed lowered borrowing costs by a quarter of a point, which had been widely expected. Officials also forecast that rates will fall by another 50 basis points over the course of this year, which likely translates to further reductions in October and December.

Powell called the decision a “risk-management cut,” signaling that the central bank was moving to prop up the faltering labor market but was still trying to tame inflation. Wall Street didn’t know what to make of that, as stocks seesawed before finishing the session a touch lower.

Eleven of the 12 voting members of the Federal Open Market Committee backed a quarter-point cut. Stephen Miran, fresh off his Senate confirmation, favored a half-point reduction —and his personal dot plot signaled he will support jumbo-sized cuts again at the October and December meetings.

It offers investors two different visions for what the Fed may look like when Powell’s term as Fed chair ends in May.

Trump could nominate a replacement like Fed Gov. Christopher Waller, who has signaled he would stay dovish but try to build a consensus on monetary policy. Or he could pick a staunch ally like Miran, who would likely favor aggressive rate cuts even if that triggered a flare-up in inflation.

Both scenarios will likely lead to lower interest rates, which will support the bull market.

But Powell’s “risk management” comment is a reminder that the central bank will only cut in the months ahead if the data suggest it’s wise to do so. Investors shouldn’t get too carried away or they—and Trump—may end up royally disappointed.

— George Glover

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The Fed Cut Rates As Expected. Here’s What’s Next.

The Federal Reserve has cut interest rates for the first time in nine months, signaling concerns about a weakening labor market. As was widely expected, the policymakers cut the benchmark rate by a quarter of a point, with only one official seeking more. There are likely more moves to come.

• Fed officials also see more rate cuts in the remainder of 2025 than they did previously. The latest dot plot of interest-rate expectations shows a median projection of a half percentage point more of rate cuts by the end of the year, which sets up for two more cuts.
• Policymakers expect to continue lowering rates in 2026, signaling that one quarter-point rate cut is on the agenda next year. The closely watched decision was nearly unanimous, after two dissenters in July. This time, newly installed Fed governor Stephen Miran was the sole dissenter.
• The Fed’s statement said Miran preferred to lower rates by a half percentage point. Miran was sworn in as a member of the board of governors on Tuesday after securing Senate confirmation late Monday. He did submit economic projections despite that quick turnaround.
• Miran’s presence on the board of governors has reignited investor concerns over whether the central bank can remain an independent entity. Miran joined the Fed directly from the White House, where he is now on leave as chair of the Council of Economic Advisers.

What’s Next: Fed Chair Jerome Powell, a target of President Donald Trump’s repeated criticism for not cutting rates sooner, doubled down on the institution’s commitment to steer clear of politics. “We’re strongly committed to maintaining our independence and beyond that, I really don’t have anything to share.”

— Sabrina Escobar

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Job Gains Slowing and Fed Sees More Downside Risks to Unemployment

Fed policymakers and Chair Powell both noted that job gains are slowing and unemployment is climbing, among other challenges to the U.S. labor market that complicate the central bank’s dual mandate to strive for both maximum employment and price stability.

• Insisting that the path forward will depend on economic data, Powell said that the labor market is facing shortages amid more stringent immigration crackdowns that have constricted the supply of workers and lowered labor-force participation.
• Powell said the decision to lower the Fed’s benchmark rate was driven by the increasing difficulty faced by college graduates, younger workers, and minorities in finding jobs, because the hiring rate is “very, very low.” He said layoffs could quickly flow into higher unemployment.
• Artificial intelligence might be starting to curb demand for labor even as investments in the new technology are fueling corporate investments and economic activity, Powell said. The full effect that AI will have on the labor market remains to be seen, and isn’t a main factor in the current slowdown.
• In its policy statement, the Fed maintained that inflation has moved up and remains somewhat elevated. But what was new this time was its statement that downside risks to employment have risen, said Rosenberg Research’s David Rosenberg.

What’s Next: Despite signs that the labor market is cooling, Fed officials kept their unemployment rate forecasts unchanged for the rest of the year. Unemployment has been drifting higher, rising to 4.3% in August, the highest since 2021. Fed officials forecast unemployment to rise to 4.5% by the end of 2025.

— Connor Smith, Megan Leonhardt, and Janet H. Cho

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Lilly and Novo Nordisk Press Ahead in Weight-Loss Pill Race

Drugmakers at the top of the weight-loss game— Eli Lilly with its Zepbound and Novo Nordisk with its Wegovy—are racing to offer a pill alternative that’s as effective as their blockbuster injectables, and new data are emerging that they are making progress.

• Lilly’s experimental weight-loss pill appears to work better as a Type 2 diabetes treatment than an oral version of Novo Nordisk’s drug Wegovy, leading to higher amounts of weight loss (9.2%) and a better reduction in blood-sugar levels (2.2%) than Novo’s pill in a recent late-stage trial.
• On Wednesday, Novo Nordisk published a study that found its pill version of semaglutide—the active ingredient in Wegovy and Ozempic—delivered 16.6% weight loss in obesity patients, and one in three participants lost 20% or more of their weight.
• Novo’s pill trial results compare with the 17% weight loss by people using the injectable version from a previous trial. Ludovic Helfgott, Novo’s executive vice president of product and portfolio strategy, noted to the Financial Times that it was the first time an oral and injectable weight-loss drug had measured up evenly.
• Berenberg analysts led by Kerry Holford upgraded Novo’s stock to Buy from Hold, saying that its pipeline is underappreciated and that it has “fresh ammunition” to fight back against Lilly’s Zepbound. Novo’s Wegovy pill is currently under Food and Drug Administration review.

What’s Next: Kenneth Custer, president of Lilly Cardiometabolic Health, said the trial results, combined with the drug’s once-daily oral dosing and broad scalability reinforce its potential as a foundational treatment for Type 2 diabetes. The late-stage results pave the way for Lilly to start regulatory submissions.

— Josh Nathan-Kazis and Janet H. Cho

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Walmart Pushes to Become a Leader In Agentic AI

Walmart doesn’t immediately come to mind as belonging in the same sentence with the term artificial intelligence, but the retailing giant could be poised to join the early leaders in agentic AI while rivals from Amazon to Target are fighting to stay ahead of the trend.

• Walmart’s main AI agent, known as “Sparky,” is testing well and will soon start taking “agentic action” rather than just answering questions in the retailer’s app, according to analysts at BofA Securities. Sparky made its debut in June.
• Agentic AI is broadly defined as an AI system that can make decisions and act with agency, without considerable human oversight. Walmart’s interest in AI is nothing new. It has been vocal about its use of large-language models to manage its product catalogs and started working with Microsoft in 2024.
• Walmart can access data from 180 million customers, the analysts noted. That data will train Walmart’s AI and tailor its responses to shoppers. John Furner, Walmart U.S.’ CEO, said this month that they were working with ChatGPT maker OpenAI to offer employees free AI training.
• Sparky is used in the app to assist customers with product suggestions, summaries of reviews and other functions. As a “super agent” it will be enabled to reorder items, plan an event for a customer, or even offer recipe suggestions by looking in a shopper’s refrigerator using a phone camera.

What’s Next: Sparky is one of four agentic AI tools Walmart is preparing as it aims to drive retail sales through its online store. Walmart is aiming for e-commerce sales to make up 50% of its total sales in five years.

— Mackenzie Tatananni and Liz Moyer

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—Newsletter edited by Liz Moyer, Patrick O’Donnell, Callum Keown