Federal Reserve Cut Rates Again And Announced an Unexpected Move

The Weekly Recap

Good morning and happy Friday! The barbarians are at the gates for a deal with Netflix, prediction markets see up to three rate cuts in 2026, a train grows in Brooklyn with an express track being looked at for connecting the borough directly with Queens. Home sellers who came to the market with aspirational pricing over six months ago are calling it quits with trying to sell as home prices are down 1.4% over the last three months. US consumer sentiment rose for the first time in 5 months and Santacon is upon us this weekend, check the survival guide in the News You Can Use section.

On a personal note, a four-alarm apartment fire that took place in my neck of the woods this week, destroyed 21 homes for over 60 residents right before the holidays, click on this link to help those who were affected.

If you missed last weeks newsletter on Why I’m Optimistic About the Trump Meeting with Mamdani Being Good News for NYC, you can read that through the link.

Federal Reserve Cut Rates Again And Announced an Unexpected Move

The biggest surprise from yesterday’s Fed meeting wasn’t the expected rate cut, it was the decision to restart Treasury purchases. At first glance, it looked like a return to quantitative easing, sparking excitement among traders and crypto bulls. But this move is far more technical than stimulative.

The Fed is buying only very short-term Treasuries, not longer-dated bonds that influence mortgage rates or the broader economy and the timing has everything to do with tax season. Corporate tax payments in April drain liquidity from the banking system, which can push interest rates above the Fed’s target. These purchases are simply meant to keep the policy rate where the Fed wants it.

While the balance sheet is expanding, it remains roughly 21% of GDP, which is right in line with historical norms of 20%. After peaking at 36% during the pandemic, it has already fallen back to levels the Fed considers the lower bound of what’s needed for smooth market function.

That’s why the Fed is temporarily buying about $40 billion per month in short-term Treasuries, a pace expected to halve once tax payments are complete. The central bank is juggling two jobs: setting interest rates and maintaining financial stability. The latter increasingly requires attention, and some argue the long-term fix may be regulatory. Analysts like Barry Knapp believe easing certain bank capital rules could expand balance sheets by $2–3 trillion, boosting reserves and reducing reliance on the Fed.

Yesterday’s statement even leaned a bit hawkish, that while suggesting fewer future cut, that message was overshadowed by prediction markets expecting more easing into 2026. Whether the Fed follows that path will depend far more on the economy than on these short-term liquidity operations.

Market Performance

Here are how some other indexes and asset classes have performed as of this morning’s opening bell.

NYC Market Update

Here is a view of NYC market activity over the past week.

Mortgage Rate Update

Mortgage rates ticked up slightly week over week but is well below the year-to-date average of 6.62% which has been providing balance and continuity to the market place. With home pricing continuing to decrease, both circumstances are welcome news to those looking for increased affordability.

News You Can Use

• NYC to Get 12,000 More Apartments from Old Office Buildings Bloomberg

• Home Sellers Are Giving Up At an Unusually High Rate CNBC

• US Consumer Sentiment Rises for the First Time in Five Months Bloomberg

• Home Prices Continue Their Downward Trend CNBC

• Traders Are Betting On Future Rate Cuts Across the Globe, Except for the Fed Bloomberg

• Fed to Resume Net Asset Purchases with $40 Billion in Securities this Month Wall Street Journal

• Donald Trump has His Final Four for Fed Chairman Financial Times

• Favorite for Fed Chairman Position Hassett Says There is ‘Plenty of Room’ For More Rate Cuts Wall Street Journal

• The Interborough Express Train in NYC will Connect Fast Growing Parts of Brooklyn and Queens Bloomberg

• Morgan Stanley Exec Expects Broad Surge in M&A US News

• Paramount Skydance Launch as Hostile Bid for Netflix CNBC

• The Aftermath of the West 107th Street Fire ILTUWS

• The Santacon Survival Guide NY Post

The Deep Insight

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