Federal Reserve December Meeting: Rate Cut of 25bp Amid Disagreement, Dot Plot Only Reserves Two Rate Cuts, Hawkish Signals Exceed Expectations
The Federal Reserve's policy meeting on December 9-10, 2025, concluded on the afternoon of December 10, and as expected, it cut rates by 25 basis points, lowering the target range for the federal funds rate to 3.50%-3.75%. This is the third rate cut in 2025 (a total of 75bp) and the sixth rate cut since the easing cycle began in September 2024.
The biggest highlight of this meeting was the rare occurrence of three dissenting votes (the first since 2019), underscoring serious internal divisions within the Federal Reserve: Governor Stephen Moore advocated for a 50bp cut, while Chicago Fed President Austan Goolsbee and Kansas City Fed President Esther George pushed to keep rates unchanged, with only 9 votes in favor of the cut.
The policy statement added expressions emphasizing that future rate cuts will be more cautious in terms of "magnitude and timing," suggesting that the easing cycle is nearing its end. The economic forecast (SEP) raised the GDP growth rate for 2026 to 2.3%, and the dot plot median indicates only one more rate cut each in 2026 and 2027 (25bp), with the federal funds rate expected to be around 3.4% by the end of 2026, and a long-term target of 3%. The distribution is extremely dispersed: 7 officials do not expect rate cuts next year, while others anticipate more cuts.
Powell stated at the press conference that this rate cut was a "difficult decision," with rising risks to employment and upward inflation risks, and that the Federal Reserve "does not have a risk-free path." He emphasized that policy is approaching a neutral range and that future decisions will be made in subsequent meetings, with no preset path and explicitly ruling out the possibility of a rate hike. He also announced the restart of bond purchases starting December 12, buying $40 billion in short-term Treasury bonds each month to maintain ample liquidity in the banking system.
The market reacted sharply: the dollar index plummeted by 0.6% in the short term, U.S. Treasury yields fell significantly, gold and silver rebounded strongly, and the three major U.S. stock indices closed higher. Trump subsequently publicly criticized Powell for "too small a rate cut."
Overall, the Federal Reserve's signal of a "final" rate cut in 2025 is clearly hawkish: the pace of rate cuts is slowing, the dot plot is conservative, and internal dissenting voices are increasing. However, Powell's exclusion of rate hikes and his statement on restarting bond purchases still provide short-term support for risk assets. The policy data dependency for 2026 is high, and the market has already priced in a "dovish pause" scenario.