The Federal Reserve is widely expected to cut interest rates again this week, but markets are bracing for Jerome Powell’s guidance on the year ahead.
By yourNEWS Media Newsroom
The Federal Reserve is expected to announce another interest rate cut at its final policy meeting of 2025, marking the third consecutive reduction as officials weigh a slowing economy against lingering inflation.
The Federal Open Market Committee (FOMC) will meet December 9–10 to decide on the benchmark federal funds rate and release its outlook for 2026. Traders overwhelmingly anticipate a quarter-point cut, which would move the target range from 3.75–4.0 percent down to 3.5–3.75 percent, according to the CME FedWatch Tool.
If approved, the move would deepen the Fed’s current easing cycle, signaling policymakers’ growing concern over deteriorating labor conditions and softening demand. Yet the path to this decision has been marked by internal division.
“The path to this decision has been one of the more intriguing ones of the year,” said Jay Woods, chief market strategist at Freedom Capital Markets, in a note to The Epoch Times. “For the most dovish fans out there, it may be tough for Powell to set the table for another cut going forward; the key is that he doesn’t rule it out entirely.”
Minutes from the Fed’s October meeting underscored sharp disagreements within the committee. Some officials have argued that elevated inflation—particularly in housing and services—warrants caution, while others believe slowing job creation justifies further cuts to support growth.
In October, the Fed voted 10–2 in favor of a 25-basis-point reduction. Board member Stephen Miran pushed for a deeper half-point cut, while Kansas City Fed President Jeffrey Schmid preferred to hold rates steady.
Investors, meanwhile, are watching Powell’s post-meeting press conference for signals on whether additional cuts are likely in early 2026. “He could easily take a more neutral stance,” Woods said. “As a data-dependent body, we will need more information before making any new decisions. This would make sense and shouldn’t scare the market.”
A key focus will be the Fed’s updated Summary of Economic Projections, which includes the so-called “dot plot” showing each official’s forecast for future interest rates. Analysts say the chart could offer a glimpse of how far the central bank plans to go in reducing borrowing costs next year.
Stephen Kates, a financial analyst at Bankrate, said the Fed faces a rare data vacuum. “Unlike the October meeting, which benefited from a just-in-time CPI report, the Federal Reserve will now have to make its decision within an unprecedented data vacuum,” he said in a statement to The Epoch Times. “The absence of recent inflation data leaves the Federal Reserve operating with limited visibility, while alternative labor indicators and political pressure are steering the committee toward a more accommodative policy stance.”
In remarks following the October decision, Powell warned that another rate cut was not guaranteed due to incomplete government data. “What do you do if you’re driving in the fog? You slow down,” he said. “There’s a possibility that it would make sense to be more cautious about moving.”
Estimates from the Cleveland Fed Inflation Nowcasting model suggest that inflation will hover between 2.9 and 3 percent for the final quarter of the year. Fed board member Christopher Waller noted that core inflation excluding tariffs remains closer to 2.4–2.5 percent, arguing that tariff-driven price pressures have not materialized.
Labor market data remain mixed: private payrolls fell by 32,000 in November, while planned layoffs declined 53 percent and weekly jobless claims fell to their lowest level in over three years.
With market expectations already set for a cut, the real test for Powell will be how firmly he commits—or avoids committing—to future easing. As Woods observed, “We get a true pulse of the room and lack of uniformity as to the future path of rates.”
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