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On December 11, the FOMC cut interest rates by another 25 basis points to the range of 3.50%-3.75%, marking the third consecutive rate cut. However, three dissenting votes signaled a widening divergence over the policy orientation. The statement added the wording “considering the magnitude and timing of further interest rate adjustments” and removed the description of the unemployment rate as “low”, reflecting a growing rift among officials regarding their assessments of employment risks and inflation stickiness. Starting from December 12, the Federal Reserve will purchase $40 billion worth of Treasury securities within 30 days.
Powell emphasized after the meeting that the current interest rate level is close to the upper bound of the neutral range, and no one is expecting a rate hike for the time being. He also pointed out that upside risks to inflation persist, but they are mainly driven by tariffs; if tariffs are reversed, inflation could fall back to the lower end of the 2% target range. On the labor market front, he acknowledged that recent monthly data has been overestimated and that there are downside risks to employment. Market expectations for the cumulative rate cut in the coming year have risen to 55 basis points, while the probability of another rate cut in January remains below 25%.
Institutions are also increasingly divided over the future policy path: some believe that the improvement in inflation is sufficient to support another round of rate cuts starting from March next year, while others expect a pause in January and a wait-and-see period in the first half of the year, and some even argue that the rate cut may be delayed until after June. Multiple Wall Street institutions noted that this “hawkish rate cut” highlights the FOMC’s difficulty in maintaining consistency under Powell’s leadership. In terms of market performance, between the release of the Fed’s statement and the press conference, gold and silver experienced sharp fluctuations before strengthening again, with silver hitting a record high; U.S. Treasury yields declined, the U.S. dollar weakened, non-U.S. currencies rebounded across the board, and U.S. stocks moved higher in tandem. Trump criticized the insufficient rate cut after the meeting, adding external noise to the policy uncertainty.
Bitunix Analyst: Against the backdrop of unclear rate cut pace, escalating internal divisions, and potential leadership changes in 2026, the market will rely more on economic data and liquidity operations to price the policy path. Short-term volatility is likely to rise, and directional signals will need to wait for further clarity on employment and inflation data.