--- the subscriber area has no ads and those above are not selected or endorsed by this site ---

FOMC December Meeting +2

15:22 10-Dec-25

Although today's decision is as expected, the press conference indicated that the Fed now sees its rate as neutral.  Powell emphasized that there is no risk-free policy, with risks to both inflation and labor rising for the near term.  It remains clear that the Fed will prioritize the latter, and it still sees tariff effects as a one-off that should peak in the first half of next year barring more changes.  The Fed also expects that the federal shutdown hurt the economy, but that should be made up in a strong first quarter.  Another noteworthy point is that we're up to two dissents in favor of no cut for this meeting, more than offsetting Miran's dissent for a half point cut.  

As already communicated, this service will give particular attention to housing data next.  Toward the end of the conference Powell acknowledged that housing faces significant challenges, which it is not equipped to address.  Though the market response is uniformly positive, the realization that we will only get one to three more press conference from Powell, and that the voting composition could change significantly, seems likely to keep that response in check.

The FOMC has cut a quarter point, as expected, and the decision statement language echoes the analysis here about what data there is being indicative of a weakening labor market, despite "expanding" economic activity.  Accordingly, the dot plot from the projections has shifted lower from the on provided at the September meeting.  Otherwise, the language is substantially the same as that from the meeting at the end of October, except that the committee is already satisfied with the decline in its balance sheet and will purchase shorter term treasuries as needed.  Markets like no surprises, so indexes are bouncing a little in tune with the year end motif projected in the parent CrowdWisers service two days ago:

On 12/8/25 10:03 AM, Esekla wrote:

The Nasdaq is up about 18% YtD, and has more than doubled over the past three years.  The S&P500 is up about 15% YtD and over 70% for the past three years.  Thus rather than focusing on tax loss harvesting for December, I think investors should be more concerned about a bout of profit taking after the new year.  This in combination with catch up data on stagflation could extend such a downturn, making December a good time to gather dry powder for those not concerned about the tax implications.  Assuming a quarter point cut on Wednesday, my focus will be on any adjustments to the outlook and then any data reaction in home prices.  As a reminder, this service's observations that the latter are faltering are not yet reflected in the national level data, with NAR numbers for November due on December 19th.

For the longer term, I see evidence that technology will continue to outperform, and not only because of the K-shaped economy.  However, the best advancements don't appear to be where the market is focusing capital.  The most interesting new technology that I've seen is the JTEC, which should pilot early next year.  I expect this could lead to one last iteration of gas generators, improving their efficiency by as much as a third, and note that the commodity is currently above $5.  I also expect that the biggest improvements in semiconductors may come from materials, rather than further miniaturization through lithography.  As I've anticipated, the federal government is set to continue supporting data center build out.  From there, I'll also track whether claims that more demand can lower consumer costs actually pan out.

The press conference is at 2:30 and there is likely to be some follow-up.

Topics:

• none