Thu Dec 11 06:20:00 UTC 2025: Here’s a news article summarizing the Fed’s December 2025 decision, along with related market reactions:

Headline: Fed Cuts Rates Again Amid Economic Uncertainty; Signals Potential Pause

Washington D.C. – The U.S. Federal Reserve, led by Chairman Jerome Powell, announced a 25-basis-point cut to its key benchmark interest rate on Wednesday, bringing the target range to 3.50%-3.75%. This marks the third consecutive rate cut since September, despite concerns over elevated inflation and a softening labor market. The decision, revealed at the conclusion of the Federal Open Market Committee (FOMC) meeting, was not unanimous, highlighting divisions within the central bank.

The move comes as the Fed attempts to balance its dual mandate of price stability and full employment. Recent data shows the unemployment rate edging up to 4.4% in September, with job gains slowing to 119,000 despite a government shutdown. While the Fed acknowledged downside risks to employment, officials also cited persistent inflation, fueled in part by tariffs implemented earlier in President Trump’s term.

Chairman Powell emphasized that future rate adjustments are not guaranteed, stating that further easing is “not a foregone conclusion.” Updated forecasts suggest policymakers expect only one additional 25-basis-point rate cut in 2026. This cautious outlook is driven by projections of moderate economic growth (2.3%) and continued low unemployment (4.4%), alongside inflation easing to around 2.4%.

The Fed also announced it would begin purchasing short-term Treasury bills to maintain adequate reserves in the financial system, addressing liquidity concerns.

Market Reaction Mixed

Financial markets reacted in a mixed fashion to the news. The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite initially rallied after the announcement. However, U.S. stock futures later tumbled as disappointing results from Oracle Corp. reignited worries that major AI investments aren’t delivering the expected payoff. Bitcoin and Ethereum also experienced declines.

The US dollar weakened against major currencies, while gold prices rose, reflecting the tendency for the yellow metal to gain in low-interest-rate environments as the yellow metal is a non-yielding asset. Indian stocks opened slightly higher, while the rupee remained relatively stable.

Analysts noted the split within the FOMC, with nine members voting in favor of the cut, one advocating for a larger 50-basis-point reduction, and two preferring to hold rates steady. This divergence suggests increased policy uncertainty in the coming year.

Looking ahead, the Fed’s next meeting is scheduled for January 27-28, 2026. The central bank will closely monitor upcoming economic data, including reports on jobs, inflation, and consumer spending, to inform future policy decisions. The uncertainty regarding interest rate trajectory, inflation trends, and broader economic conditions generally puts downward pressure on the US dollar, as markets reassess growth and yield prospects.

Additional points included from the article:

  • Trump said the rate cut could be bigger and he wants the next Fed chair to be “honest” about rates.
  • VK Vijayakumar, Chief Investment Strategist, Geojit Investments, noted that the dot plot indicates one more rate cut in 2026 and another in 2027.
  • Powell emphasized that housing is set to become a problem, and the Federal Reserve does not have the tools to cater to the structural housing shortage in the US economy.

    Read More