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Key Points from Powell's Press Conference (December 2025)

1. Interest Rate Policy: Completed a 'three consecutive cuts' within the year, with a total reduction of 75 basis points; the current federal funds rate range is 3.50%-3.75% (upper end of the neutral range); made it clear that interest rate hikes are not a baseline expectation, with no predetermined path for policy, decisions will be made flexibly at each meeting, with a median rate forecast of 3.4% by the end of 2026.
2. Inflation Outlook: Short-term inflation risks are tilted to the upside, with the current over-adjustment mainly due to tariffs (one-time impact); the median core PCE inflation expectation for 2025 is 3.0%, dropping to 2.5% in 2026, gradually returning to the 2% target after tariff reductions.
3. Economic Outlook: The current economy is not overheating, and the baseline expectation for 2026 is steady growth, supported by factors including fiscal policy support, artificial intelligence expenditure, and continued consumption.
4. Labor Market: There are downward risks in the labor market, with a policy focus shifting towards supporting employment; specific overestimation of job data was not mentioned, only emphasizing the need to stabilize employment through accommodative policies.
5. Debt Purchases and Liquidity Operations: Starting from December 12, the purchase of short-term treasury bills will be resumed (USD 40 billion within 30 days), with the scale expected to remain high in the coming months; the cap on the standing overnight repo operation limit has been removed to ensure the smooth operation of the money market.
6. Market Expectations: The futures market bets on more easing next year, with a probability of two or more rate cuts reaching 68%; there are divisions within the Federal Reserve, with 3 out of 12 voting members opposing this rate cut.
7. Market Reaction and External Evaluation: The three major U.S. stock indices collectively rose (Dow Jones up 1.05%), U.S. Treasury yields declined, the dollar weakened, and non-U.S. currencies strengthened; Trump criticized the magnitude of the rate cut as insufficient, arguing for a stronger easing approach.