Bloomberg Surveillance: Fed Pause, AI Spending, and Government Shutdowns

Federal Reserve's Cautious Optimism

• 💡 The Federal Reserve has paused rate hikes for the first time since July, citing a steadying labor market and an improving economy.
• 🎯 Claudia Sahm notes reasons for cautious optimism, including reduced rates, fiscal support, and solid consumer spending.
• ⚠️ Fed Chair Powell sketched a path for inflation to decline but lacked full conviction, indicating a wait-and-see approach to future rate cuts.
• 🏛️ Powell emphasized that political questions regarding Fed independence and the dollar would be addressed in upcoming congressional hearings, not press conferences.

Governor Waller's Dissent and Fed Chair Speculation

• 📈 Governor Chris Waller's dissent is seen as consistent with his long-standing concerns about labor market stabilization and inflation outlook.
• 🧐 While his dissent may have spiked his chances for Fed chair, the decision to pause was a 10-2 vote, suggesting the chair is not the swing vote.
• ⚠️ The focus remains on the Fed making decisions based on economic conditions, with politics being a risky path.

AI Spending and Market Reactions

• 🚀 Meta and Microsoft are reaffirming commitments to significant AI spending, though market reactions differ.
• 💰 Meta's stock is rewarded due to guidance of 30% topline growth, suggesting Zuckerberg's investments are paying off.
• ☁️ Microsoft faces a