Federal Reserve Chairman Jerome Powell speaks during a press conference after the Federal Open Market Committee meeting in Washington, DC on December 10, 2025.
Chip Somodevilla | Getty Images
As expected, it was a “hawkish cut.” Still, investors managed to find some gifts wedged between the lumps of coal.
Two regional bank presidents, Jeffrey Schmidt of Kansas City and Austan Goolsby of Chicago, wanted rates to remain unchanged even though the Federal Reserve cut them by a quarter of a percentage point in the state on Wednesday.
Their caution is reflected in a “dot plot” of the Fed’s rate outlook, which shows officials making just one cut in 2026 and another in 2027.
Even the Fed’s interest rate statement was recycled from its December 2024 meeting, beginning a nine-month period of no interest rate cuts until September of this year.
So why did the US market rise after the meeting?
The biggest surprise was the Fed’s announcement that it would begin buying $40 billion in Treasury bills starting Friday. This movement increases the money supply in the economy. In other words, this is a secret way to ease conditions and help support financial markets.
Second, Chairman Jerome Powell dismissed speculation about future rate hikes.
“I don’t think raising rates is anyone’s base case scenario at this point,” Powell said. “I haven’t heard anything like that.”
Federal Reserve officials also believe that the U.S. economy remains resilient. Both companies collectively raised their forecast for economic expansion in 2026 to 2.3% from the 1.8% expected in September.
“We have an extraordinary economy,” Powell said.
And the market may be gearing up for a special end to the year.
“The final interest rate decision of 2025 essentially paves the way for a year-end Santa Claus rally, with the S&P 500 poised to pass the milestone of 7,000 in the coming weeks,” said Jose Torres, senior economist at Interactive Brokers.
That would be a pretty decent Christmas surprise for investors.
—CNBC’s Jeff Cox contributed to this report.
What you need to know today
And finally…
The image in this handout shows Anduril flying an unmanned drone YFQ-44A for the first time at an unspecified location in California, USA, on October 31, 2025.
Anduril | via Reuters
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