Fed expected to continue rate cut plan in December 2025

VTV.vn - The Fed is expected to continue cutting interest rates in December 2025 despite internal disagreement.

Headquarters of the US Federal Reserve in Washington DC. (Photo: Kyodo/VNA)

US Federal Reserve Chairman Jerome Powell is expected to push for another quarter-point interest rate cut next week, despite growing concern among other Fed policymakers that inflation remains too high.

In October 2025, the Fed cut interest rates for the second time in a row this year, after the US labor market unexpectedly weakened sharply in the third quarter of 2025. However, this decision immediately faced a wave of "hawkish" opposition from some Fed officials - including five members of the Federal Open Market Committee (FOMC) with policy voting rights - signaling hesitation or unwillingness to support a third rate cut of the year.

The divide is exacerbated by the lack of new economic data from the Fed amid a government shutdown that lasted much of October and November 2025. The latest inflation report, released on December 5, only covers September 2025 – information that is unlikely to change the current policy debate.

Against this backdrop, investors expressed doubts about the Fed’s ability to continue cutting interest rates in mid-November 2025. However, this development quickly reversed on November 21, when New York Fed President John Williams – considered a close ally of Mr. Powell – signaled that he “sees room” for a rate cut “in the near future.” The market immediately reacted, with a probability of more than 90% believing that the Fed will act next week.

Economists surveyed by Bloomberg expect the Fed to pause its easing after another quarter-point cut in December 2025, and to make two more rate cuts in 2026, expected in March and September 2026. Analysts expect the new stream of economic data—after statistical agencies complete updates following the government shutdown—to help clarify the long-standing tension between the Fed’s two goals: containing inflation and optimizing the labor market.

However, the internal debate at the Fed has not stopped. US President Donald Trump is expected to announce Mr. Powell's successor soon when his term as Fed Chairman ends next May. Mr. Kevin Hassett - a senior economic advisor and a person with a high level of consensus with President Trump's decisions - is emerging as the leading candidate for the position of "captain" of the Fed. This has raised concerns among investors that the next Fed Chairman may operate interest rate policy according to the direction of the White House, thereby increasing the risk of inflation.

Source: https://vtv.vn/fed-du-kien-tiep-tuc-ke-hoach-cat-giam-lai-suat-trong-thang-12-2025-100251207101046228.htm