WSJ What’s News – PM Edition

Episode: Fed Lowers Interest Rates but Powell Sows Doubt About December Cut
Date: October 29, 2025
Host: Alex Osolov
Guests: Greg Ip (WSJ Chief Economics Commentator), Alex Ward (WSJ National Security Reporter), Dylan Tokar (WSJ Regulatory Policy Reporter)

Episode Overview

This episode focuses on the Federal Reserve's latest interest rate cut—the second in a row—along with growing uncertainty about the prospect of further cuts in December. The episode also delves into U.S. demands for increased defense spending by Asia-Pacific allies, major corporate layoffs, record-setting moments for the tech sector, and a Senate proposal to raise bank deposit insurance limits.

Key Discussion Points & Insights

1. Federal Reserve Rate Cut and Its Uncertainty

• Latest Move: The Federal Reserve cut interest rates by 0.25 percentage points, moving the benchmark short-term rate to 3.75%-4%, the lowest in three years (00:46).
• Division Among Fed Officials:
  • Some members support further cuts.
  • Others think enough has been done; there are significant disagreements about December.
  • “Policy is not on a preset course.” — Greg Ip (01:50)
• Voting Dynamics:
  • Expected split: most supported the quarter-point cut.
  • Dissent: Fed Governor Steve Myron wanted a larger half-point cut; a Reserve Bank President favored no cut at all. (02:03)
  • “There’s strong disagreement about what to do in December.” — Greg Ip (02:20)
• Shifting Data Context:
  • In September, officials saw more cuts as likely due to weaker labor market signals.
  • Since then, labor market hasn’t further deteriorated; consumer spending, stock market, and AI-related optimism persist.
  • Not as urgent to cut further now; more officials feel rates are near the ‘sweet spot’ (02:49-03:31).
• Data Dependence and Uncertainty:
  • Lack of official labor data due to a government shutdown complicates decision-making.
  • Relying on non-official data, anecdotal evidence on layoffs, and price indicators.
  • Another cut in December is now seen as unlikely barring surprises (03:43-04:23).

2. Market Reactions and Corporate Updates

• Market Response:
  • Dow: closed down ~0.2% after Powell’s comments on December uncertainty.
  • Nasdaq: extended gains, closing with a record for the fourth straight session.
  • S&P 500: finished flat (04:34).
• Nvidia Milestone:
  • First company ever to reach $5 trillion in market value—stock closed at $207.16.
  • Driven by AI enthusiasm and large partnerships (04:34).
• Major Job Losses:
  • Paramount: ~2,000 layoffs to address redundancies amid strategic change.
  • General Motors: >3,300 layoffs in EV and battery units; ~1,500 expected to be rehired by mid-2026 (04:34-06:00).

3. Trump’s Asia Tour & U.S. Defense Demands

• Breakthrough with South Korea:
  • President Trump and President Lee Jae Myung near completion of a new trade pact after intense negotiations over South Korean investment in the U.S (06:00).
• Defense Spending Push:
  • Trump urges Asian allies—especially Japan and South Korea—to increase defense budgets, echoing his earlier NATO pressure campaign.
  • “There’s a very clear reason: one is the China of it all.” — Alex Ward (06:46)
• Asian Allies’ Dilemma:
  • Concerns more spending could signal U.S. intention to reduce its military role in the region, potentially creating more insecurity.
  • “It’s kind of like a damn if they do, damn if they don’t.” — Alex Ward (06:56)
• Threats in Asia:
  • Thousands of U.S. troops in Korea and Japan are potential targets if China escalates.
  • Renewed threats from China on Taiwan—China refuses to rule out forceful takeover (07:19-08:08).
• Reception to U.S. Demands:
  • Allies broadly receptive—concerns over China make defense spending politically palatable.
  • Trump’s approach echoes Biden’s, pointing to rare continuity in U.S. policy: “There’s remarkable continuity in the Biden to Trump policies.” — Alex Ward (08:44).

4. Corporate Earnings

• Quick Recap (09:44):
  • Meta: Record $51.2B in Q3 revenue (+26% YoY), but net income ($2.7B) lags expectations.
  • Google: 16% revenue growth in advertising and cloud.
  • Microsoft: $77.7B in revenue; Azure cloud unit up 40%.

5. Senate Proposal to Raise Deposit Insurance Limits

• Proposal Overview:
  • Senators want to increase FDIC insurance from $250,000 to up to $10 million for certain accounts (10:52).
• Motivation:
  • Driven by fallout from the 2023 regional banking crisis, when businesses pulled uninsured funds from troubled banks (11:19).
• Political Support:
  • Supported by an unusual coalition: Treasury Secretary Scott Besant and Sen. Elizabeth Warren.
    • Besant: Wants a level playing field for community and midsize banks.
    • Warren: Sees big banks as benefiting from an implicit "too big to fail" guarantee and wants them to help pay the cost (12:17).
• Big Banks’ Resistance:
  • Would pay more into insurance funds but not get the higher limit for their own accounts.
  • “They’re going to be paying for something that doesn’t potentially benefit them.” — Dylan Tokar (13:00)

Notable Quotes & Memorable Moments

• On the rate path:
  “Policy is not on a preset course.” — Greg Ip (01:50)
• On internal Fed disagreement:
  “There’s strong disagreement about what to do in December.” — Greg Ip (02:20)
• On Asia’s defense conundrum:
  “It’s kind of like a damn if they do, damn if they don’t.” — Alex Ward (06:56)
• On policy continuity:
  “There’s remarkable continuity in the Biden to Trump policies.” — Alex Ward (08:44)
• On deposit insurance proposal:
  “They’re going to be paying for something that doesn’t potentially benefit them.” — Dylan Tokar (13:00)

Timestamps for Important Segments

• Fed rate cut announcement & uncertainty: 00:46 – 04:23
• Markets and tech sector milestones/job cuts: 04:34 – 06:00
• Trump’s Asia trip & defense spending debate: 06:00 – 09:00
• Earnings roundup: 09:44 – 10:50
• Deposit insurance debate explained: 11:19 – 13:28

This episode pairs timely financial analysis with global politics, providing listeners a concise synthesis of complex developments influencing markets, economic policy, and international relations.