Fed Chair Powell: December Rate Cut Is “Far From a Foregone Conclusion"

 

Jerome Powell Warns December Rate Cut May Not Happen

Following the recent interest-rate cut by the Federal Reserve (the Fed), chair Jerome Powell made clear that markets should not count on another reduction in December 2025. While the Fed trimmed its benchmark rate by 25 basis points — bringing it down to the 3.75 %–4.00 % range — Powell cautioned that future policy moves are far from predetermined. 

Powell emphasized that there are “strongly differing views about how to proceed in December,” signifying deep internal divisions within the Fed’s policymaking body. He underlined that “policy is not on a preset course,” highlighting the central bank’s commitment to making decisions based on unfolding economic data rather than on a fixed schedule. 

Why the Fed Is Hesitant: Inflation Still Elevated, Employment Risks Rising

Inflation Remains Stickier Than Desired

Despite recent progress in cooling price growth, inflation continues to be a concern. Some measures of core inflation remain above the Fed’s long-term comfort zone. Powell pointed out that although inflation has moderated from peak levels, it is still “somewhat elevated,” complicating the choice between cutting rates and preserving price stability. 

Moreover, external pressures — such as tariffs and supply-chain disruptions — are feeding into costs in unpredictable ways. These dynamics make it difficult for policymakers to be confident that inflation’s downward trend will continue. 

Labor-Market Softness Adds Another Layer of Risk

On the other side of the Fed’s dual mandate — safeguarding employment — some signs point to emerging fragility in the U.S. labour market. Several Fed officials have voiced concerns about cooling hiring and growing downside risks to job growth. 

Powell acknowledged this balancing act, stressing that rate decisions must weigh both inflation the labour-market outlook carefully. He said the Fed is “well positioned” to wait for more clarity before altering its policy stance. 

Implications for Markets, Borrowers and Savers

Financial markets may recalibrate expectations. Investors who had priced in a near-certain December rate cut may need to adjust their projections — which could increase volatility in stocks, bonds and other interest-rate sensitive assets.

Borrowers could see higher costs for longer. If the Fed delays further rate cuts, mortgage rates, consumer loans and credit-card interest may remain elevated  impacting households and businesses alike.

Savers might benefit  temporarily. For people relying on high-yield savings or money-market accounts, sticky interest rates may continue to offer better returns compared to a rapid-cut scenario.

Policy uncertainty looms. The Fed’s “data-driven, meeting-by-meeting” approach means that each upcoming inflation or employment report could meaningfully shift expectations for future rate moves.

What to Watch Next

The outcome of the Fed’s December 9–10 meeting will largely depend on a few key data points: inflation readings (CPI and PCE), labour-market strength (jobs growth, unemployment, wage trends), and signs of broader economic resilience or softness. 

In the meantime, markets and consumers alike should brace for further uncertainty. As Powell emphasized, there is no risk-free path for monetary policy right now.