The United States Federal Reserve (US Fed) is set to hold its two-day committee meeting to decide on the key benchmark interest rates for the US economy, starting on Tuesday, 9 December 2025, and will release the outcome of the same on Wednesday, 10 December 2025.

On Wednesday, the Jerome Powell-led Federal Open Market Committee’s (FOMC) decision will come amid conflicting trends in the US economy as the central bank aims to strike a balance in its dual mandate to stabilise prices in America and cater to the labour market of the economy.

In its October policy outcome, the US Federal Reserve decided to cut the interest rates by 25 basis points to the range of 3.75-4.00% for the second time in 2025, amid elevated inflation levels in the country and the US government shutdown.

Why are US Fed officials divided?

In the last policy outcome, 10 out of the total 12 US Fed FOMC members voted in favour of the current monetary policy action of easing the interest rates by 25 basis points, while one moved for a 50-basis-point cut, and another wanted to keep it unchanged.

Although the markets are pricing in an upcoming rate cut, the divided US Fed is set to meet, facing a number of unique challenges ahead of its final policy decision announcement.

Making things more complicated for the central bank, FOMC committee members are now amid a growing internal split on whether or not to have a third rate cut in its December policy outcome.

Earlier this year, the committee members were hesitant to cut the rates before finally easing the policy measures in September 2025, first time since December 2024.

This time, the US Fed has to be careful, as high interest rates can push up the unemployment numbers in the economy. The US Bureau of Labor data, released on 20 November 2025, showed that the unemployment rates in the US economy rose to hit 4.4% in September 2025, while America added 119,000 jobs despite the federal government shutdown.

US Labor Secretary Lori Chavez DeRemer, New York Fed President John Williams and San Francisco Fed President Mary Daly were among those who said that the risk of a softening labour market in the US economy outweighs the rationale of holding the rates high for longer amid weak demand and tightening credit concerns.

“A further reduction in the policy rate at the December meeting is not a foregone conclusion, far from it,” said US Fed Chairman Jerome Powell during his media address after the FOMC’s policy outcome.

Here’s what FedWatch predicts

CME Group’s FedWatch data predicts that 89.6% of the markets predict that the US Federal Reserve’s (Fed) FOMC is poised to further ease the key interest rates in the US economy down to 3.50-3.75% from its current levels, marking another 25 basis point rate cut in the December policy outcome.

However, 10.4% of the market still expects the central bank to hold the key interest rate at its current level of 3.75-4.00% marking a no change for the lending rates in the US economy.

US Fed Policy Outlook

On the outlook for the upcoming US Fed’s policy decision, Taimur Baig, Chief Economist at DBS Bank, said that the central bank may not be at a “ultra dovish” yet, but the market is predicting a rate cut trajectory ahead.

“The Fed may not be ultra dovish (yet), but the market is quite sure that the path ahead features lower rates and ample liquidity,” said Taimur Baig.

The expert also highlighted in a recent report that the cost-of-living concerns also dominated this year’s off-cycle elections, and these looming concerns will not fade if the US Fed makes an error, keeping the policy rates too loose for the US economy.

“Cost of living concerns dominated this year’s off-cycle elections, and they won’t fade, especially if the Fed ends up making an error by keeping policy too loose,” said Baig.

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