The Fed report

highlights from The FOMC Policy Update
DECEMBER 15, 2025

Last Wednesday, the Federal Open Market Committee (FOMC) released its statement and held a press conference following the conclusion of its December meeting.

FOMC Policy Updates: Key Highlights

  • As generally expected, the FOMC lowered the target range for the federal funds rate by 25 basis points to 3.50-3.75%, its third rate cut of 2025.
  • For the fourth consecutive meeting, the FOMC decision was not unanimous: Fed Governor Stephen Miran voted to lower the target range by 50 basis points, and Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeffrey Schmid voted to leave the target range unchanged.
  • The Fed also announced that it will initiate purchases of shorter-term U.S. Treasuries in order to maintain an appropriate supply of bank reserves, which it judges have reached an ‘ample’ level. These purchases are in addition to the previously announced reinvestment of Agency MBS portfolio paydowns into Treasury bills, which began this month.

notable commentary

  • Chair Powell reiterated that the persistent tension in its dual mandate – which has been further complicated by limited data availability due to the federal government shutdown – continues to present a challenging situation with “no risk-free path for policy.” Following three rate cuts in 2025, however, the Fed views the federal funds rate as within a neutral range and believes the FOMC is “well positioned to wait and see how the economy evolves” as further data is released to determine the appropriate next steps for monetary policy.
  • Chair Powell emphasized that the decision to initiate purchases of Treasury bills in the near-term is solely for reserve management purposes and does not indicate the beginning of a quantitative easing (QE) cycle. The first purchases will occur this month and total approximately $40 billion. Purchase levels may remain elevated for several months but are expected to eventually decline to be consistent with seasonal patterns in Fed liabilities and overall market conditions.
  • The Fed’s quarterly Summary of Economic Projections (SEP) indicates median expectations of one 25 basis point rate cut in each of 2026 and 2027, with a wide dispersion of assessments among FOMC participants. Fed funds futures are currently pricing in two rate cuts in 2026.
  • Notably, the Fed also eliminated the aggregate daily limit on its Standing Repo Facility (SRF) operations, which was previously set at $500 billion. The SRF is a key monetary policy tool that provides backstop funding liquidity to ensure smooth functioning of the repo market, and its use has been increasing in recent months.

Important Disclosures
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