On the early morning of December 11, 2025, Beijing time, the Federal Reserve announced a 25 basis point rate cut to 3.5%-3.75%, with Chair Powell emphasizing at the subsequent monetary policy press conference that the current policy is at the upper end of the neutral interest rate range and that future policy paths will depend on economic data changes.

Federal Reserve Monetary Policy Decision and Market Response
Rate Cut Decision: The Federal Reserve has cut interest rates for the third consecutive time by 25 basis points (a total of 75 basis points this year), and announced it will purchase $40 billion of short-term government bonds monthly starting December 12 to maintain market liquidity.‌‌1‌‌2
Market Response: The three major U.S. stock indices rose collectively, with the Dow Jones up 1.23%, indicating the market has already priced in the rate cut expectations.‌‌1
Dot Plot Forecast: Federal Reserve officials’ median expectation is for a 25 basis point rate cut in 2026 and 2027, but there are significant differences in forecasts (7 officials expect no rate cuts in 2026).‌‌1‌‌2
Key Policy Statements by Powell
Neutral Rate Positioning: Clearly states that the current policy rate is at the upper end of the neutral interest rate range, emphasizing that there is no predetermined policy path.‌‌2‌‌3
Inflation and Employment Risks: Points out that inflation risks are tilted to the upside, while employment risks are tilted to the downside, requiring a balance of dual policy objectives.‌‌1‌‌4
Tariff Impact Assessment: If new tariffs are not implemented, product inflation may peak in Q1 2026, with tariff factors causing inflation to exceed expectations.‌‌2‌‌5
Internal Policy Divisions and Future Outlook
Decision Divisions: Three FOMC members oppose this decision (one advocates a 50 basis point rate cut, two prefer to keep rates unchanged), marking the highest opposition count in six years.‌‌1‌‌2
Labor Market Signals: New employment data may be exaggerated; it is expected that 20,000 jobs will be lost each month in the future, with artificial intelligence possibly partially impacting employment softness.‌‌2‌‌5
Policy Outlook: The Federal Reserve emphasizes that future policy adjustments will be based on employment market balance. Currently fragile economic data may support another rate cut in 2026.‌‌6