Fed's Final 2025 Huddle: December Meeting Looms with 87% Cut Odds, Powell to Chart 2026 Course
Published Date: 8th Dec, 2025
As holiday lights flicker across the U.S., the Federal Reserve's Federal Open Market Committee (FOMC) prepares for its year-end gathering on December 9-10, 2025—a pivotal session that could deliver a third consecutive rate cut amid cooling inflation and a softening jobs market. With markets pricing in an 87% probability of a 25-basis-point reduction to 3.50%-3.75%, Chair Jerome Powell's Wednesday press conference and updated economic projections will dissect the Fed's "soft landing" trajectory, signaling the pace of easing into 2026 against persistent services inflation and fiscal uncertainties. This capstone meeting, the last before midterms, underscores the central bank's delicate dance: sustaining growth without reigniting price pressures in an economy humming at 2.8% Q3 GDP.
Dovish Drift Meets Hawkish Holdouts: The FOMC's Tightrope
October's minutes, released November 19, laid bare a committee cleaved by conviction: a slim majority backed the 25-basis-point trim to 3.75%-4.00%, but dissenters like Stephen I. Miran clamored for a bolder 50-basis-point slash to bolster employment, while Jeffrey R. Schmid urged a pause to gauge inflation's stubborn core. "The risks have balanced, but vigilance remains key," Miran echoed in a November 26 speech. December's data deepens the divide: November's 199,000 payroll add—below forecasts—nudged unemployment to 4.2%, yet wage growth at 3.9% year-over-year tempers recession fears. Core PCE held at 2.7%, edging toward the 2% target but sticky in shelter costs.
A Reuters economist poll (December 4) forecasts 82% consensus for the cut, with two more in 2026 to 3.00%-3.25% by year-end. CME FedWatch odds surged to 87% from 75% last week, buoyed by dovish murmurs from New York Fed's John Williams and Governor Christopher Waller. "The labor market merits sustained support," Williams noted November 26, while Waller advocated a December trim to keep policy "modestly restrictive." Hawks counter: Atlanta's Raphael Bostic, in a December 1 interview, warned of "over-easing" amid services inflation's grip.
The Summary of Economic Projections (SEP)—updated quarterly—will spotlight the "dot plot," with medians eyeing 50 basis points total in 2026. Markets bet on a pause in March, but Powell's rhetoric could shift that script.
Powell's Podium: Data-Dependent Dance in Uncertain Times
Powell's 2:30 p.m. ET presser will unpack the statement's subtleties: expect "balanced risks" with employment edging inflation as the tilt, amid Q4 GDP forecasts at 2.1% (Atlanta Fed GDPNow). Consumer resilience—holiday retail up 3.2% in November—counters manufacturing PMI's 48.5 contraction, but global crosswinds loom: Europe's ECB and UK's BoE hold December 18, Japan's BoJ hikes December 19. Trump's fiscal splash—tax cuts, tariffs—looms as an inflation wildcard; Powell, ever independent, will reaffirm data primacy.
Wall Street's Wager: Volatility on the Vix
Anticipation whips markets: S&P 500 dipped 0.8% Friday on tariff tremors, but futures nod 0.5% up Monday. 10-year yields eased to 3.92%, dollar index steady at 105.5. Tech like Apple (+1.2% weekly) savors rate relief; banks like JPMorgan (-2.1%) fret margins.
JPMorgan's Michael Feroli sees the cut "anchoring expectations," but Berenberg warns of "higher for longer" if inflation rebounds. WisdomTree's Jeremy Siegel calls it "the most uncertain FOMC in years," data distortions from the shutdown lingering.
Year-End Yardstick: Fed's 2025 Swan Song
This December finale crowns a cut trilogy—75 basis points from 5.25%-5.50% peak—taming 9.1% June 2022 inflation. Powell's "soft landing" holds, but shadows lurk: Ukraine flares, Middle East oil spikes, debt ceiling dance. As FOMC adjourns, the globe tunes in: a quarter trim may calm, but Powell's prose steers 2026's sails. In the Fed's firm grasp, December isn't closure—it's compass for the calendar beyond.
Date: 8th Dec, 2025
