Federal Reserve Chair Jerome Powell reacts while speaking during a press conference following the Federal Open Markets Committee meeting at the Federal Reserve on Dec. 10, 2025 in Washington, DC.
It ended up being a "hawkish cut," as expected. Still, investors managed to find a few gifts tucked between the lumps of coal.
Even though the U.S. Federal Reserve lowered interest rates on Wednesday stateside, two regional bank presidents — Jeffrey Schmid of Kansas City and Austan Goolsbee of Chicago — wanted rates to stand pat.
Their cautioned was echoed in the Fed's "dot plot" of rate projection, which showed officials penciling in just one cut in 2026 and another for 2027.
Even the Fed's rate statement was repurposed from the December 2024 meeting, which ushered in a nine-month period without cuts until September this year.
Why, then, did U.S. markets rise after the meeting?
The biggest surprise was the Fed's announcement that it would begin purchasing $40 billion in Treasury bills, starting Friday. That move increases the money supply in the economy. In other words, it's a stealthy way to ease conditions, which helps support financial markets.
Next, Chair Jerome Powell dismissed speculation about future hikes.
"I don't think that a rate hike ... is anybody's base case at this point," Powell said. "I'm not hearing that."
Fed officials also see the U.S economy as remaining resilient. Collectively, they increased their forecast for economic expansion in 2026 to 2.3% from an earlier estimate of 1.8% in September.
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