The Federal Reserve cuts interest rates for the third consecutive time by 25 basis points, signaling a shift to a "wait-and-see" policy

On December 10th local time, the Federal Reserve announced another 25 basis point rate cut, lowering the federal funds rate target range to 3.5%-3.75%. This is the third consecutive rate cut after September and November, with a total reduction of 75 basis points.

However, this decision was accompanied by notable internal disagreement, with 3 members voting against it—the first such occurrence since September 2019—highlighting significant divisions within the committee regarding future policy directions.

At the post-meeting press conference, Chair Jerome Powell delivered a key statement, which the market interpreted as signaling a shift in policy stance from a "preset path" to a "flexible wait-and-see" approach.

He emphasized that the current interest rate "is in a good place" to respond to changes in economic outlooks, and that the Federal Reserve is now "also in a favorable position to wait and observe further economic developments."

Most notably, Powell also stated that "no one currently expects rate hikes as a baseline," and he offered no guidance on whether there will be another rate cut in the near future.

He reiterated that "monetary policy is not a fixed route set in advance," and future decisions will be made "gradually, based on the circumstances of each meeting."

Meanwhile, the "dot plot," reflecting the Federal Reserve officials' long-term interest rate forecasts, indicates that the policy path is expected to become very flat. The chart predicts only one rate hike in 2026, another in 2027, ultimately reaching a long-term target of around 3%, consistent with September's forecast.

This relatively flat long-term interest rate "dot plot," combined with Powell's emphasis on the "wait-and-see" strategy, seems to collectively send a message to the market: the Fed's most intensive rate-cutting phase may be nearing its end, with future policy adjustments becoming more tentative, data-dependent, and significantly slower.

In simple terms, in the short term, the market is relatively optimistic due to the expectation of no rate hikes; but from a medium-term perspective, it needs to gradually adapt to a longer cycle of maintaining relatively high interest rates.

#美联储利率决议 # Powell