Fast Summary Card
- The Federal Reserve meets December 9–10, its final policy meeting of 2025.
- A third consecutive 25 bps rate cut is expected — but internal divisions and missing data make this meeting unusually uncertain.
- The Fed will release its Summary of Economic Projections (SEP) and the crucial dot plot, signaling its rate path for 2026.
- Jerome Powell holds his year-end press conference on December 10 at 2:30 PM ET.
- Market volatility is expected to spike across USD, gold, equities, and yields.
Why This Meeting Matters
The December FOMC meeting is always important — but 2025’s edition could define the first half of 2026.
The Fed faces:
- A weakening labor market
- Incomplete economic data due to shutdown delays
- Sticky inflation still above target
- A deeply divided Committee as shown in recent Minutes
- Markets already pricing in aggressive easing for 2026
This creates a rare setup where one meeting can reset expectations across every asset class.
What the Market Expects Right Now
1. A High Probability of a Rate Cut
The CME’s FedWatch tool shows markets pricing an ~87% chance of a 25-basis-point cut.
If delivered, the target range becomes:
➡️ 3.50% – 3.75%
This would be the Fed’s third consecutive cut, following reductions in:
- September
- October
The tone from Powell will decide whether this is the final cut or the start of a broader easing cycle.
2. The Hawks vs. The Doves
The Committee is split, and the division is public.
The Doves Want Another Cut
Driven by:
- Rising unemployment (near 4.4%)
- Slowing payroll growth
- Risk-management arguments to protect the economy
Officials like Christopher Waller and John Williams have hinted that the Fed must support a cooling labor market.
The Hawks Want a Pause
Driven by:
- Persistent Core PCE inflation above 2%
- Concern about inflation “re-accelerating” if cuts come too fast
- Missing data due to government shutdown delays
- A desire to maintain credibility
Boston Fed’s Susan Collins has been vocal about holding rates steady.
This clash transforms the December meeting into a binary event.
The SEP: The Most Important Part of the Day
The Summary of Economic Projections, including the dot plot, will shape market expectations into 2026.
Traders will focus on:
- Inflation projections for 2026
- GDP growth outlook
- Unemployment expectations
- Where policymakers expect the Fed Funds rate to end in 2026
If the median dot shows:
- More cuts → USD weakens, equities rally
- Fewer cuts → USD strengthens sharply, risk assets drop
The dot plot is the market mover.
Key Timings Next Week
- FOMC Statement + SEP:
🕒 Dec 10, 2:00 PM ET - Powell Press Conference:
🕝 Dec 10, 2:30 PM ET - Minutes Release:
📅 Jan 8, 2026
A full blackout on Fed speeches begins Nov 29, meaning markets have entered the quiet period — no more clues.
Market Impact Scenarios
Scenario 1 — 25 bps Cut + Dovish SEP
- Stocks jump
- USD weakens
- Gold rallies
- Yields fall
Scenario 2 — 25 bps Cut + Hawkish SEP
- Stocks volatile
- USD strengthens
- Gold drops
- Yields rise
Scenario 3 — No Cut (Hawkish Surprise)
- Market shock
- USD surges
- Equities sell off
- Gold initially drops but may rebound on volatility
This is the highest-volatility FOMC since July.
What Traders Should Watch
- The delayed September NFP reaction still influencing Fed thinking
- Missing October jobs & inflation data
- Bond market positioning heading into year-end
- USD strength vs. safe-havens (JPY, CHF)
- Gold’s reaction to SEP projections
- Tech sector sensitivity in Powell’s Q&A
Powell’s answers to the first five questions often set the tone — especially if he addresses labor weakness.
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