Rebel Capitalist News Fed Rate Decision LIVE (Reaction)
Dec 12, 2025
George dives into the Fed's decision to cut rates by 25 basis points, analyzing how such cuts affect long-term Treasury yields. He argues that market expectations often drive the Fed's actions, highlighting historical examples from the late '80s, the dot-com era, and the 2007–2009 financial crisis. Powell discusses labor market trends, inflation, and the impact of AI on growth. George challenges some of Powell's views, especially on tariffs and reserves, while emphasizing the importance of understanding nominal GDP in interest rate dynamics.
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Fed Cuts Aren't The Whole Story
- Fed cuts don't mechanically move long-term market rates across the curve.
- The 10-year Treasury often ignores front-end Fed moves and reflects growth and inflation expectations.
History Shows Curve Independence
- Historical Fed-cut cycles show long-term rates often stayed flat while Fed funds plunged.
- That divergence implies long-term yields follow growth/inflation expectations, not Fed policy alone.
Long Rates Can Rise During Cuts
- During several cut cycles the long end rose while the Fed cut, worsening inflation risk.
- The Fed often reacts to market expectations rather than dictating them.