The Fed caved to what markets wanted (needed?). Chairman Powell did an admirable job in his press conference of calmly conveying a message that everything is somewhat  awesome, but the global economy is slowing, and the Federal government shutdown is  having a dampening effect (neither of those things are the fault of Fed policy).  So, we’re now fully migrated to expectations for no rate hikes this year. Further, the Fed may reduce its rate of QT.  The Powell Put is alive and well.

With this news the Fed is now painted into a corner. It knows it merely has a 2.5% Fed Funds rate as primary weapon to prevent /slow another recession. Well, that and reducing QT to 0.  The previous recession  took dropping the Fed Funds rate from 5.25% to 0,  followed by a few $T in freshly printed money (QE).  The recession before that required the Fed to lower the Fed Funds rate from 6.5% to 1%.  2.5% isn’t a lot of ammunition.