Fast Summary Card

• Fed cuts 25 bps to 3.50–3.75%, the third cut in a row — but the story is the vote split (9–3) and the tone shift.
• Committee is openly divided: Miran wanted 50 bps, Goolsbee & Schmid wanted no cut.
• Powell signals a pause ahead, stressing growing labour-market risks and tariff-driven inflation noise.
• SEP shows no major easing cycle ahead: only one cut in 2026, one in 2027.
• Fed announces T-bill reserve-management buying starting Dec 12 (~$40B).
• Markets swing sharply: USD slips, gold rebounds, U.S. equities rally on “no more hikes” assurance.

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The Fed Cut — But It Didn’t Want To

This was a reluctant cut.
The Fed reduced rates by 25 bps because the labour market is softening faster than expected, not because inflation is comfortably cooling.

The messaging was unmistakable:

• Rate hikes are not coming back.
• The debate is now hold vs cut, not hike vs cut.
• The Fed wants more data before committing to further easing.

The addition of the phrase “extent and timing” in the statement is a direct signal:
The Fed is stepping back. The next move is not guaranteed.

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A Split Vote That Reveals the Real Story

The 9–3 split is the most important development of the meeting:

• Miran (50 bps cut) → deeply concerned about labour deterioration.
• Goolsbee & Schmid (no cut) → want more confirmation before easing.

This is the first time since 2019 that three FOMC members openly opposed the decision.
The Fed is united on one thing — no hikes — but divided on how quickly to ease.

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Powell’s Press Conference: A Juggle Between Two Mandates

Powell walked a tightrope.

He reinforced that the Fed is balancing two conflicting goals:

1. Inflation still too high (but mostly tariff-driven now)
2. Labour market cooling faster than expected

And for the first time this cycle, Powell prioritized the jobs side.

Key revelations:

1. Payrolls may be overstated by ~60K per month

The Fed believes true underlying job growth may be negative.

2. Tariffs are causing temporary inflation

Remove tariff effects and inflation is “in the low 2s.”
This gives the Fed more confidence to pause.

3. Policy is now “at the top of neutral”

A major hint that tightening is done.

4. Labour risks dominate everything

Powell repeated it several times:
“If we didn’t have to worry about the labour market, the policy rate would be higher.”

Put simply:
Employment, not inflation, forced this cut.

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The SEP: Little Appetite for a Cutting Cycle

Despite the slowdown, the Fed’s projections barely budged:

• Only 25 bps of cuts projected in 2026
• Only 25 bps in 2027
• Neutral rate steady at 3%
• Unemployment 4.4% in 2026
• Inflation forecasts slightly lower
• Growth revised up to 2.3% thanks to post-shutdown rebound

This is not a Fed preparing an easing wave — it is a Fed avoiding damage.

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T-Bill Purchases Return — Quiet but Important

Starting December 12, the Fed will buy ~$40 billion in Treasury bills as part of reserve-management operations.

This is NOT QE — but it loosens liquidity at the short end and aligns with the cautious, risk-management tone.

Expect the pace to stay elevated for “a few months,” then taper.

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Market Reaction: Volatility Across the Board

USD

DXY dropped below 99, as the “no more hikes” narrative outweighed a conservative SEP.

Gold

XAU/USD spiked into the $4,190–4,220 zone as falling yields + cautious tone = support.

Equities

Dow +497 pts
S&P 500 back toward all-time highs
Nasdaq green, but muted on rate-path uncertainty

Markets loved two things:

• Fed will expand the balance sheet at the short end
• Rate hikes are officially dead

Some analysts already call this the opening for a Santa Rally.

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Bottom Line: A Fed That Cut Because It Had To

This meeting shows a central bank that:

• Does not trust the labour data
• Does not trust the inflation data (tariff noise)
• Does not trust the economic trajectory enough to tighten

The Fed is now firmly in wait-and-see mode, preparing for slower growth with a cautious hand on the wheel.

The question for traders is not:
“Will the Fed cut again soon?”
But rather:
“How bad is the labour market beneath the surface?”

If payroll revisions worsen, cuts may accelerate.
If tariffs fade on schedule, inflation risk disappears.

The Fed is watching every data point — and so should you.