U.S. FOMC Meeting Minutes (December 9-10, 2025)

FOMC members debated December's cut, expect more in '26 

• The Federal Reserve Open Market Committee (FOMC) lowered the federal funds rate to a target range of 3.75% to 3.50% in December.
• The minutes showed that the committee is still concerned about still-elevated inflation. The expectation remains for the effect of tariffs on core goods prices to "wane", however some committee members expressed uncertainty about when this would happen, while others debated the extent to which they would be passed through to final goods. The minutes also noted that "some participants" mentioned that "elevated inflation might prove more persistent than expected".
• On the labor market, participants noted that job market conditions "had continued to soften" with the unemployment rate rising in September. "Low dynamism" was noted by participants as being a product of both lower demand for labor and decreased labor supply. Moreover, participants assessed "that downside risks to employment had risen in recent months."
• Participants generally judged that "uncertainty about their forecast for real GDP growth remained high ". A few participants who voted in favor of lowering rates this meeting "could have supported keeping the target range unchanged". 
• Critically, most participants expressed views that the target range for the federal funds rate could be further reduced "if inflation declined over time as expected." However, some also noted that given their outlooks for the economy, leaving the rate unchanged "for some time" after the December cut "would likely be appropriate" to "acquire more confidence about inflation returning to 2 percent." The move to a "more neutral policy stance" was also noted to be helpful for mitigating the risk of a significant worsening of labor market conditions.

Key Implications

• The key takeaway from this meeting, is that amid all the uncertainty, policymakers still think there is room to reduce the fed funds rate and bring policy closer to neutral. Worries about sticky inflation and the risks to inflation expectations appear to be, for now, secondary to managing the risks associated with a deterioration in the labor market. 
• After a data dry spell, greater insight into the state of the U.S. economy is on the way. Our view remains that after delivering December's cut, policymakers will take a pause in the first quarter to assess how the economy is responding to its recent moves, before delivering another pair of reductions around mid-year.

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