On December 11 Beijing time, the Federal Reserve announced a 25-basis-point cut to the federal funds rate target range, bringing it down to 3.50%-3.75%, in line with market expectations. This marks the Fed's third rate cut this year, totaling 75 basis points, and the sixth cut since the current easing cycle began in September 2024.

FE HLDGS INTL's analysis suggests this rate cut remains precautionary, driven by cooling U.S. employment data and inflation still exceeding targets. However, divisions within the Fed persist, with three out of twelve voting members opposing the decision—two favoring unchanged rates and one, Trump-nominated Governor Milan, advocating for a 50-basis-point cut.

On one hand, the Fed remains optimistic about economic growth, revising upward its GDP forecasts for 2025–2027 in December and signaling caution toward further easing. On the other hand, Chair Powell struck a dovish tone, citing systemic overestimations in employment data and expressing pessimism about the labor market outlook.

Additionally, the incoming Fed chair could significantly influence U.S. rate policy. Kevin Hassett, director of the White House National Economic Council and a leading candidate for the role, has previously stated there is "ample room" for further cuts. Uncertainty continues to cloud the Fed's future rate path.