Fed Ends QT, Stays the Course: Markets Yawn, Eyes Shift to Powell and Big Tech Earnings

The Federal Reserve delivered a broadly expected policy decision Wednesday, cutting its benchmark rate by another quarter point and formally announcing the end of its balance sheet reduction program effective December 1. The move, which lowers the target range for the federal funds rate to 3.75%–4.00%, marks the central bank’s second consecutive quarter-point reduction as policymakers seek to balance lingering inflation pressures against a gradually cooling labor market. Markets took the announcement largely in stride, with investors looking ahead to Chair Jerome Powell’s press conference for additional context on the Fed’s outlook heading into the December meeting.

The accompanying policy statement offered few surprises and was largely in line with expectations. Officials noted that “economic activity has been expanding at a moderate pace,” a slight upgrade from September’s language describing growth as having “moderated in the first half of the year.” The shift suggests the Fed sees the slowdown as having stabilized, even as overall activity remains modest. Labor market commentary was little changed, acknowledging that “job gains have slowed” and the unemployment rate “has edged up but remains low,” while adding that more recent indicators confirm those trends.

Inflation language remained firm, with the Committee stating that inflation “has moved up since earlier in the year and remains somewhat elevated.” That phrasing, while subtle, indicates continued concern that price pressures have not fully eased despite progress earlier in 2025. The Fed reiterated its longer-run inflation goal of 2%, maintaining a data-dependent posture on future rate adjustments. However, the statement did note that “downside risks to employment rose in recent months,” a slightly more explicit acknowledgment that the labor market is cooling at the margin.

The most notable policy development came from the balance sheet section, where the Committee announced it would “conclude the reduction of its aggregate securities holdings on December 1.” This marks the formal end of quantitative tightening, a move that was widely anticipated but not guaranteed. The timing suggests the Fed is comfortable halting runoff before year-end, signaling a shift toward maintaining liquidity stability as the broader economy slows. Still, because markets had largely priced in the possibility of QT ending this quarter, there was no major reaction in Treasuries or equities following the announcement.

The decision to end balance sheet reduction underscores the Fed’s effort to manage two competing realities: inflation remains somewhat elevated, but financial conditions have tightened. By concluding QT while maintaining a gradual rate-cut trajectory, the Committee appears intent on avoiding excessive strain in funding markets or bank reserves. In effect, the Fed is signaling that it considers policy to remain restrictive, but not so much as to risk a deeper slowdown or financial instability heading into 2026.

Market reaction to the decision was muted, reflecting how closely aligned it was with expectations. Equity futures held steady, Treasury yields were little changed, and the dollar showed only marginal movement. Investors appear content to wait for Powell’s post-meeting press conference, where he is expected to elaborate on the Fed’s view of the evolving economic risks and its approach to balancing rate cuts with the inflation outlook. Powell’s tone could prove important in shaping short-term sentiment—particularly given the market’s sensitivity to any hint of a shift in the policy path heading into the December meeting.

For now, traders view the Fed’s message as one of cautious continuity: the central bank is easing slowly, staying data dependent, and managing liquidity carefully. The key question is whether Powell emphasizes downside economic risks—which could reinforce expectations for further cuts—or highlights the persistence of inflation, which might temper near-term easing bets. Futures markets currently imply another quarter-point cut by year-end, but the odds could shift depending on Powell’s tone and upcoming data on payrolls, CPI, and PCE.

Adding to the quiet tone, the timing of the announcement places monetary policy in direct competition with one of the busiest earnings nights of the quarter. Microsoft, Meta Platforms, and Alphabet are all set to report after the closing bell—three hyperscaler heavyweights whose results will likely dominate headlines once Powell’s remarks conclude. Given their combined market capitalization and outsized weighting in major indices, these reports could easily overshadow the Fed if they deliver meaningful surprises on AI-driven growth or capital spending trends.

In the meantime, markets are expected to remain orderly unless Powell delivers an unexpected hawkish twist. Equity indices entered the decision near recent highs, and with the Fed’s move largely anticipated, there’s little reason for investors to reposition aggressively before earnings hit. Some mild profit-taking could emerge if Powell’s comments fail to inspire confidence—especially under the narrative that “all good news is already priced in”—but that dynamic could quickly reverse should the hyperscalers post strong results.

In sum, today’s policy update confirmed what most investors already assumed: the Fed is easing gently while wrapping up quantitative tightening, inflation remains a concern but not an emergency, and labor risks are edging higher. With Powell’s press conference still to come and a tech-heavy earnings slate on deck, market attention will likely shift rapidly from monetary policy to micro fundamentals. Unless the Fed chair “rocks the boat,” markets appear poised to drift calmly into the evening, awaiting whether Big Tech’s results provide the next spark—or signal that the year-end rally may already have run its course.