Key takeaways from Powell’s press conference on December 10:

1. **Monetary Policy**: Powell stated that a rate hike is not the baseline assumption for the Fed’s next move. The current rate level allows the Fed to remain patient and observe economic developments.

2. **Labor Market**: Employment growth may have turned slightly negative since April after adjusting for overestimations in jobs data. Technical factors may distort CPI and household employment figures. Unemployment could rise modestly by 0.1–0.2%. AI may contribute to labor market softness, but its impact remains limited.

3. **Inflation**: Progress has been made in non-tariff-related inflation. Without new tariffs, goods inflation could peak in Q1 2026.

4. **Government Shutdown (Oct–Nov)**: The 2026 growth outlook was revised slightly upward, reflecting the resolution of the shutdown.

5. **Personal Plans**: Powell has no new plans post-Fed chair tenure.

6. **Market Reaction**: - S&P 500 trimmed gains to 0.7%, Dow rose 556 pts (+1.1%), Nasdaq +0.4%, Semiconductors +1.4%, Banks +2.7%. - 2Y Treasury yield fell 7.5 bps to 3.54%, 10Y yield dropped ~5 bps below 4.14%. - Spot gold rose 0.6% to $4,239 before retreating to $4,182 during Powell’s remarks. - Bitcoin briefly surged toward $94,500 near the press conference’s end.

**Policy Decision**: The Fed cut the federal funds rate by 25 bps to 3.50–3.75% and announced short-term Treasury purchases. Powell emphasized that economic prospects remain unchanged, with bond purchases likely staying elevated in coming months.

**Economic Outlook**: - GDP growth forecasts: 1.7% (2025), 2.3% (2026), slightly above September projections. - Unemployment expected to stabilize near 4.5% by year-end. - Inflation risks tilt upward, while labor market risks lean downward.

**Tariff Impact**: Powell views tariff-driven price increases as temporary, with effects fading by mid-2026. The Fed aims to prevent one-time hikes from fueling persistent inflation.

**Productivity & AI**: AI may boost productivity but could disrupt labor markets. Powell noted structural productivity gains predating AI adoption.

**Housing Market**: Remains weak due to supply shortages and locked-in low mortgage rates, limiting affordability improvements.

**Neutral Rate**: With policy now near neutral, the Fed can assess data before further adjustments. No consensus exists on additional cuts, but hikes are not the baseline scenario.

**Transcript Excerpts**: - **On labor data**: Adjusted employment growth may already be negative. - **On tariffs**: Goods inflation could peak in Q1 2026 if no new tariffs are imposed. - **On policy path**: "We’re in a position to be patient." - **On AI**: Early-stage impact on jobs is unclear but warrants monitoring.

Powell reiterated the Fed’s dual mandate balance, acknowledging no risk-free policy path amid competing inflation and employment risks.