investingLive Americas FX news wrap 10 Dec:Fed is well positioned after 25 bp cut.
- Powell signals neutral policy stance as non tariff driven inflation fades
- Fed Powell:Layoffs, hiring remain low. Rates are now in a plausible range of neutral.
- The line-by-line comparison of the October and the December FOMC statements
- The Federal Reserve cuts rates by 25 basis points to 3.50% to 3.75%
- White House economic advisor Hassett: Fed has plenty of room to cut rates
- BOC Macklem: Markets can count on us taking decisions one at a time
- Crude oil inventories see a drawdown at -1.812 million versus -2.310 million estimate
- A line by line comparison of the October and December BOC statements.
- BOC Macklem: Given the current balance of risks, the policy rate is at the right level
- The Bank of Canada keeps rates unchanged at 2.25% at the December 2025 meeting.
- US employment cost index for Q3 0.8% versus 0.9% estimate
- investingLive European FX news wrap: Final countdown to the last Fed decision of 2025
The Federal Reserve cut rates by 25 basis points as expected to 3.5% to 3.75%. The also announced that they would be purchasing bills in what traders and analysts are calling a mini-QE. The cut was expected to be a hawkish cut. It was more neutral in that the Fed chair emphasized that the Fed is “well-positioned”.
The vote split came in at 9–3, with Fed Governors Goolsbee and Schmid dissenting in favor of keeping rates unchanged. Meanwhile, Governor Miran dissented in the opposite direction, calling for a 50-basis-point cut.
The dot plot shows that four additional Fed presidents preferred to hold rates steady, suggesting a larger bloc of hawkish resistance underneath the headline decision. While the full list of dissenters isn’t yet confirmed, it’s highly likely that Dallas Fed President Logan and Cleveland Fed President Hammack were among them—both are well-known inflation hawks and will serve on the FOMC in 2026.
The identities of the remaining two “hold” voters are still unclear, but based on the composition of the upcoming rotation, it is safe to conclude that Goolsbee and Schmid will be replaced next year by presidents who leaned toward keeping rates unchanged. That shift could be more hawkish (depending on the other two) or unchanged in 2026.
We should expect to hear more from those hawkish members in the next day or two as they explain their stance and begin shaping the narrative around the Fed’s evolving policy bias.
Looking at the projections for end of year GDP, Unemployment rate and PCE inflation (headline and core) showed:
- GDP projected higher to 2.3% from 1.8%
- Unemployment projected unchanged at 4.4%
- PCE inflation projected lower at 2.4% from 2.6%
- PCE Core projected lower at 2.5% vs 2.6%
- The year end Fed Funds target projected unchanged at 3.4%
Key Takeaways from the Powell press conference comments.
During Powell’s press conference, key takeaways were:
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Powell signaled that policy is now in the plausible range of neutral, with no preset path and decisions remaining data dependent.
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The labor market is softening gradually, with rising downside risks to employment but no signs of a sharp downturn.
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Inflation remains somewhat elevated, driven largely by tariffs, while services disinflation continues.
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Consumer spending is resilient, and AI-related business investment remains strong.
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Powell emphasized the Fed is well-positioned to wait for more data before deciding on January policy moves.
In Summary
Chair Powell framed today’s decision as part of a careful shift toward neutral policy, stressing that the Fed has no preset path and will continue to evaluate incoming data “meeting by meeting.” He noted that the labor market has softened—job gains have slowed, unemployment has edged higher, and labor demand has cooled—but he does not foresee a sharp deterioration, even as downside risks to employment have increased. On inflation, Powell said overall price pressures remain somewhat elevated, with goods inflation now entirely driven by tariffs while services disinflation continues. He also cautioned that recent shutdown-distorted inflation and labor data will require careful interpretation.
Powell highlighted that consumer spending remains solid and that business investment, especially in AI data-center capacity, continues to expand. Housing remains weak, and a quarter-point rate cut would do little to improve affordability given long-standing supply constraints. Looking ahead, Powell said the Fed is well-positioned to wait for a substantial amount of new data before the January meeting, adding that the Committee broadly supported today’s decision and remains focused on guiding inflation back to 2% while avoiding unnecessary damage to the labor market.
The markets were encouraged by the Fed chair comments and the decision from the Fed.
US stocks did move lower on the comment that the rate was now near neutral, but reversed higher as the fear of inflation seemed less a concern (with growth continuing).
- Dow industrial average rose 497.46 point or 1.05% to 48057.75. The all-time record high close reached on November 12 was at 48254.82.
- S&P index rose 46.17 points or 0.67% to 6886.68. That is just short of its record high reached on October 29 at 6890.59.
- NASDAQ index rose and 77.67 points or 0.33% at 23654.16. Its all-time high close reached on October 29 is at 23958.47.
- Russell 2000 rose 33.36 points or 1.32% at 2559.60. The index closed at a new record high.
Yields were encouraged by the comments:
- 2-year yield 3.538%, -7.5 basis points. The 2-year yield is now within the Fed funds target rate between 3.5% and 3.75%.
- 5 year yield 3.730%, -4.9 basis points
- 10 year yield 4.150%, -3.5 basis points
- 30 year yield 4.795%, -1.3 basis points.
The USD moved lower after the decision. The declines of the greenback vs the major currencies showed:
- EUR, -0.58%
- JPY -0.58%
- GBP -0.65%
- CHF -0.78%
- CAD -0.35%
- AUD -0.57%
- NZD -0.61%
This article was written by Greg Michalowski at investinglive.com.
