Federal Reserve Chairman Jerome Powell speaks during a press conference following the Federal Open Markets Committee meeting at the Federal Reserve on December 10, 2025 in Washington, DC.
Chip Somodevilla | Getty Images
The Federal Reserve agreed to a much-anticipated quarter-percentage point interest rate cut on Wednesday in a meeting full of intrigue and surprises. Here's a look at five top takeaways:
- The hawkish cut is real – sort of. Wall Street had expected the Fed to show great caution in cutting interest rates, warning that the bar for further easing was high. However, markets didn't seem to mind: stocks posted solid gains on the day, while Treasury yields fell.
- While a 9-3 vote might indicate broad support for the move, the Federal Open Market Committee disagrees. Three disagreements is a lot, in fact the most since September 2019. And one of the “no” votes came from an unexpected source: Chicago Fed President Austan Goolsbee. Gov. Stephen Miran wanted a half-point cut, while Goolsbee and Kansas City Fed President Jeffrey Schmid favored keeping it. A total of six of the 19 participants at the meeting said they had not voted for the cut, giving voice to “soft disagreements” that the easing goes far enough.
- The points held. In short, the “dot plot” of individual officials' rate views has changed little in the coming years, with the median showing just one cut in 2026 and another in 2027 before the key rate settles at around a neutral 3%. Markets mostly took the committee at its word, although futures prices late in the day suggested a non-negligible 38% chance of two rate cuts next year.
- Bond buying is back. Well, not really bonds, but notes that the Fed will buy again starting Friday. With overnight funding markets under pressure, the central bank said it will buy $40 billion in short-term debt securities as part of a monthly program aimed at stabilizing markets and keeping the key interest rate within the quarter-point range. The buying level will change, but some market participants viewed the announcement as a stealthy easing that is positive for risk assets.
- Chairman Jerome Powell was largely optimistic about growth, as was the committee. “We have an extraordinary economy,” said Powell, who has just three meetings left as chairman. The representatives of the Open Market Committee also raised their assessment and raised the prospects for gross domestic product growth in 2026 by half a percentage point to 2.3%.
What they say
“Given the lack of committee consensus expressed today, the slow release of traditional economic data, and the arrival of a new Fed chair in early 2026, we expect the Fed will likely remain on hold for a while longer. Still, continued weakness in some labor indicators can certainly lead to another 25 basis point cut in January.” — Rick Rieder, head of fixed income at BlackRock and rumored finalist to replace Powell
“The Fed's guidance likely tells us less than usual about the interest rate outlook for two important reasons. First, it knows less than usual about the current economic situation, as the release of economic statistics has been delayed by the shutdown. Second, the Fed's guidance does not take into account how its approach will change after Chairman Powell's term ends in May. In 2026, the Fed is more likely to cut interest rates more than signaled in the December dot plot, rather than less.” — Bill Adams, chief economist at Comerica Bank
“The Fed has raised its growth expectations for next year, which, combined with the increase in cash supplies to American households through changes in tax policy, will raise doubts about the path of monetary policy. This dynamic, in our view, significantly raises the hurdle for a possible rate cut at the Fed's next meeting in January.” — Joseph Brusuelas, Chief Economist, RSM