The December Federal Open Market (FOMC) meeting will take place at 3am tomorrow (Thursday) Asian time, making it the last interest rate meeting for 2025.
At this meeting, the Federal Reserve (Fed) is expected to continue with its third consecutive interest rate cut, although the central bank is expected to warn that the easing measures may be nearing an end.
After several weeks of uncertainty about the stance of policymakers, the market is now almost certain that the Fed will cut rates by 25 basis points, which will bring the Fed’s base rate to a range of 3.5% - 3.75%.
However, this time the decision is not as easy as expected.
There is a division among FOMC members, some want to continue cutting to avoid the risk of prolonged weakness in the labor market, while others believe that easing too quickly could revive inflationary pressures.
Because of this, the term “hawkish cut” has become the main focus of the market.
This refers to a situation where the Fed cuts rates, but at the same time sends a strong message that they may not be cutting again anytime soon.
According to former Fed monetary affairs director and now Yale professor Bill English, the most likely outcome is a hawkish cut. He said the Fed is expected to signal that it has made the necessary adjustments and is comfortable with the current rate level, as long as economic data moves as expected.
Overall, the market is now waiting for two main things early tomorrow morning: the rate decision and the actual message that Chairman Jerome Powell will bring about the Fed's direction in 2026.
