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Federal Reserve Chairman Jerome Powell speaks at a news conference after the Federal Open Market Committee meeting on December 10, 2025 in Washington, DC.
Chip Somodevilla | Getty Images
As expected, the end result was a “hawkish rate cut.” Still, investors managed to find some gifts in it lumps of coal
Although the Federal Reserve cut interest rates by a quarter of a percentage point on Wednesday, two regional bank presidents — Jeffrey Schmid of Kansas City and Austan Goolsby of Chicago — want rates to remain unchanged.
Their caution is echoed in a “dot plot” of the Fed’s rate forecasts, which shows officials predicting just one rate cut in 2026 and another in 2027.
Even the Fed’s interest rate statement has been recalibrated from its December 2024 meeting, which kicked off a nine-month period of no rate cuts until September this year.
So why did the U.S. stock market rise after the meeting?
The most surprising thing was the Federal Reserve’s announcement that it would start buying $40 billion in Treasury bills on Friday. This move increases the money supply in the economy. In other words, it’s a stealth way to mitigate the situation and help shore up financial markets.
Next, Chairman Jerome Powell dismissed speculation about future rate hikes.
“I think raising rates … is not anybody’s base case right now,” Powell said. “I’m not hearing that.”
Fed officials also believe the U.S. economy remains resilient. Overall, they raised their forecast for economic expansion in 2026 to 2.3% from 1.8% in September.
“We have a phenomenal economy,” Powell said.
Markets may be gearing up for a remarkable finish to the year.
“The last interest rate decision in 2025 essentially paves the way for a year-end Santa Claus rally, with the S&P 500 poised to cross the 7,000 milestone in the coming weeks,” said José Torres, senior economist at Interactive Brokers.
This would be a very nice Christmas surprise for investors.
—CNBC’s Jeff Cox contributed to this report.
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Anduril | Reuters
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