Apostolos Paschalidis
Greece
2m
The Fed's rate decision on Wednesday 🧮 What we know so far • In its latest meeting (29 October 2025), the Fed lowered the target for the federal funds rate by 25 basis points, bringing it to 3.75%–4.00%. • Along with the rate cut, the Fed stopped quantitative tightening (i.e. it paused shrinking its balance sheet). • However, at that meeting, the Fed signalled that a further rate cut in December was not guaranteed — because economic data remain mixed. • Indeed, within the Fed there’s division: some officials are cautious about inflation and want to hold rates steady, while others lean toward cuts, given signs of labor market weakness. 📅 What’s approaching — and what markets expect • The next Fed policy meeting is scheduled for 9–10 December 2025. • As of early December, many market participants expect a third consecutive rate cut, potentially of 25 basis points — to bring the federal funds rate down to roughly 3.50%–3.75%. • Key catalysts for that expectation: signs of labor-market cooling (e.g. weaker hiring data), dovish comments from some Fed officials, and overall economic uncertainty. ⚠️ Risks / What could go differently • The Fed may decide not to cut again — especially if inflation remains sticky or data show resilience in wages/prices. Some Fed members are reportedly pushing for a more cautious approach. • Given the internal division, even if a cut happens, there may be dissenting votes, which could make the decision—and subsequent guidance—somewhat unclear. • Markets may react sensitively not just to the rate decision, but to the accompanying Fed statement and press conference, especially forward guidance about future moves, inflation outlook, and balance-sheet policy. 🎯 What to watch (if you track the impact) If you follow markets, the upcoming Fed action could move: • Equities — lower rates tend to support stocks, especially growth and rate-sensitive sectors. • Bonds / yields — a cut could push yields down, boosting bond prices. • Currencies (USD) — weaker interest rates could soften the dollar relative to other currencies. • Financial conditions / risk sentiment — a dovish Fed can ease borrowing costs and support risk-on behaviour globally.
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