The Federal Reserve cuts rates by 25 basis points to 3.50% to 3.75%

The Federal Reserve cut rates by 25 basis points as expected.

The full statement from the Fed.

December 10, 2025

Federal Reserve issues FOMC statement

For release at 2:00 p.m. EST

Available indicators suggest that economic activity has been expanding at a moderate pace. Job gains have slowed this year, and the unemployment rate has edged up through September. More recent indicators are consistent with these developments. Inflation has moved up since earlier in the year and remains somewhat elevated.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months.

In support of its goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 3-1/2 to 3‑3/4 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

The Committee judges that reserve balances have declined to ample levels and will initiate purchases of shorter-term Treasury securities as needed to maintain an ample supply of reserves on an ongoing basis.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Susan M. Collins; Lisa D. Cook; Philip N. Jefferson; Alberto G. Musalem; and Christopher J. Waller. Voting against this action were Stephen I. Miran, who preferred to lower the target range for the federal funds rate by 1/2 percentage point at this meeting; and Austan D. Goolsbee and Jeffrey R. Schmid, who preferred no change to the target range for the federal funds rate at this meeting.

The table of Fed projections shows:

Of significance from the projections for end of 2026:

GDP higher to 2.3% from 1.8%
Unemployment unchanged at 4.4%
PCE inflation lower at 2.4% from 2.6%
PCE Core lower at 2.5% vs 2.6%
The year end Fed Funds target group is unchanged at 3.4%

The chance of a cut was around 90% going into the meeting.

Just before the decision:

Dow was up 0.34%
S&P was unchanged
Nasdaq was down -0.38%

The stock market prices have moved up marginally

Overall,

The vote was more dovish with only 2 voting for no change. There was not a doubt on the vote.
The Fed did say they will buy shorter-term bills. A mini-QE? Dovish.
The dot plot did indicate that 4 additional non-voting members would have voted to keep rates unchanged. 13 did vote for a cut.

Only 8 only voted for MORE than 1 cut in 2026
Fed sees stronger growth and lower inflation but still above 2%.

After the cut (2:13 PM ET):

Dow up 290 points ro 0.61% at 47849.52
S&P index of 18.75 points or 0.27% at 6858.70
NASDAQ index -18 points or -0.08% at 23559
Russell 2000+22.10 points or 0.80% at 2548.62 (would be a record)

The market has a 58% rate cut for April now up marginally from 54% before the decision.

Looking ahead to 2026, the following regional presidents will be voting:

Cleveland
Philadelphia
Dallas
Minneapolis

How have they tilted more recently?

Fed Presidents — Hawkish or Dovish?

Cleveland Fed – Beth M. Hammack

Lean: Hawkish / Inflation-focused

Hammack has emphasized inflation risks, financial-stability vigilance, and keeping policy sufficiently restrictive.
Early speeches conveyed concern about easing too soon.
Generally aligned with the “higher for longer” crowd.
She explicitly warned against further rate cuts, stating that lowering rates now “risks prolonging this period of elevated inflation.”
She expressed concern that cheaper money encourages dangerous risk-taking in financial markets (e.g., speculation in stocks and crypto).
In November 2025, she stated she would have opposed the Fed’s decision to cut rates had she been a voter at that specific meeting.

Philadelphia Fed – Anna Paulson

Lean: Centrist with a mild hawkish tilt

Paulson is data-driven and not strongly ideological.
She tends to highlight inflation uncertainty and the need for clear evidence before easing.
Often described as a moderate policy voice, slightly hawkish on inflation persistence.
She recently stated she is “a little more worried about the labor market than I am about inflation,” which is a classic dovish signal. However, she balanced this by saying she wants to “approach the December FOMC cautiously,” signaling she isn’t in a rush to slash rates unless the data demands it.

Dallas Fed – Lorie K. Logan

Lean: Hawkish

Logan is one of the most consistently hawkish voices on the Committee.
Frequently stresses inflation risks, market-function considerations, and discipline in policy stance.
Historically resistant to premature cuts.
On December Rate Cuts: She has explicitly signaled doubt about cutting rates in December 2025, stating she sees “no need to cut rates” unless the labor market crashes (which she does not see happening yet).
On Inflation: She argues that inflation is “not convincingly on track” to 2% and is worried that recent cuts are fueling dangerous financial speculation (loose financial conditions).
On the “Neutral” Rate: She believes the “neutral rate” (r*) has risen, meaning the Fed needs to keep rates higher than normal just to keep the economy stable.

Minneapolis Fed – Neel Kashkari

Lean: Dovish (historically) → More centrist since 2022

Kashkari used to be one of the most dovish members.
However, during the inflation surge (2022–2024), he shifted significantly more hawkish.
In 2025, he is considered centrist, leaning dovish again as inflation normalizes and labor-market risks rise.
Still more open to rate cuts than Logan or Hammack.
December 2025 Outlook: He remains “undecided” but leans toward Holding rates. He has warned that cutting rates simply to help with “affordability” won’t work if inflation remains the primary burden on families.

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