FOMC Update - Dec 2025
December 10, 2025
As expected, the FOMC lowered the federal funds rate target range by 25bp to 3.50%-3.75%. The Fed will begin $40B of T-Bill purchases on 12/12/2025 to maintain an ample supply of reserves. A tweak in the statement referring to “the extent and timing of additional adjustments” suggests that officials are likely to pause their rate cuts in January.
Rates and Market:
Rates and Market:
- Fed Funds Target: 3.50%-3.75%
- Market Reaction: Equity markets rallied modestly and UST 10s were mostly unchanged. UST 2s, however, fell by approximately 4bp.
- The market is pricing a 25bp rate cut by mid-2026 and another 25bp cut by the end of 2026. This is contrary to the median dot plot of one 25bp cut in 2026.
The FOMC announced the following actions and analysis:
- 9-3 policy vote with two outright dissents (Schmid and Goolsbee) and Miran voting for a 50bp cut.
- Fed says inflation has eased but remains “somewhat elevated”.
- Powell says, “Consumer spending appears to have remained solid, and business-fixed investment has continued to expand,” but housing remains “weak”.
- The consensus 2026 growth forecast: The median estimate is now 2.3%, up from 1.8% in September.
Previous Report
FOMC Update - Oct 2025 (10/29/25)
As expected, the FOMC lowered the federal funds rate target range by 25bp to 3.75%-4.00%. The Fed will end the reduction of its securities holdings beginning on December 1st. The Fed reiterated its labor market concerns...