Three fast takeaways
We added a quick read on what actually changes for readers this week.
- Borrowing costs: A 25 bps cut would trim monthly payments modestly, but lenders already priced most of it in.
- Investing tone: Equities are leaning on AI and megacap earnings; a dovish press conference keeps that risk-on bid intact.
- Jobs lens: With JOLTS data delayed, Powell’s language on labor tightness will steer expectations for cuts in early 2026.
Rate path snapshot
Here’s how we’re mapping the next few meetings based on current pricing and our inflation/labor read.
| Marker | Dec 2025 | Early 2026 (our base case) | Notes |
|---|---|---|---|
| Policy rate move | -0.25% | Hold with a dovish bias | Another cut requires softer core services prints |
| Labor signals | JOLTS near 7.2M | Trend toward 7.0M | Falling openings without layoffs = orderly cooling |
| Mortgage impact | Rates already priced the cut | Gradual repricing lower | Expect lenders to trim selectively, not across the board |
Publisher opinion: IngeniousTests view
Our desk expects Powell to emphasize “gradual and conditional” easing. We see space for one additional cut in early 2026 only if core services cool further and job openings settle near 7 million without a spike in layoffs. That bias keeps mortgage and auto loan repricing shallow rather than a waterfall.
What to know before the Fed gathers
There is little mystery about what will happen when the Federal Reserve gathers this week for its last meeting of 2025. A quarter-point cut in interest rates is all but baked in, but whether any or how many of the members of the central bank’s monetary policy committee dissent and the message that Fed Chairman Jerome Powell sends at his press conference afterward are the real mysteries. The nuance investors are watching is how many cuts the statement implies for 2026.
Since the government shutdown that began in October and ended after six weeks, economic data from the government has been limited. But what has come out, along with private sector reports, has generally confirmed a weakening labor market but also an economy that has shown some resilience. Without fresher data, markets will lean harder on Powell’s tone to calibrate risk.
Last Friday, a key inflation report showed a little easing of the core personal consumption price expenditures index that strips out food and energy costs. That is probably enough for Powell and others to agree to a cut. But there will no doubt be some warning about the stickiness of inflation remaining around the Fed’s 2% annual goal, particularly with shelter disinflation slowing.
Policy divide and leadership questions
Further clouding the outlook for 2026 is the increasingly divided nature of the Fed, with Powell set to end his term as chairman in May. President Donald Trump and his aides have indicated a new Fed chief could be named before the end of the year, and current National Economic Council Director Kevin Hassett is considered the favorite. He would bring a willingness to argue for lower rates, though the Senate confirmation calendar is likely to dictate timing more than rhetoric.
“Given the upcoming rotation of voting members and the potential appointment of Kevin Hassett as Fed Chair, the increasingly divided policy views within the Committee point to one clear conclusion: polarization will become a defining feature of the Fed’s policy landscape,” wrote EY-Parthenon Chief Economist Gregory Daco. The question our readers ask most: will that polarization translate into slower policy action? The short answer is yes—debate slows delivery.
The economic backdrop will matter and forecasts call for a slowing in growth early in 2026 as the effects of Trump’s import tariffs continue to affect prices for many goods. However, some positive stimulus is expected from the tax cuts that Trump signed into law earlier this year but will be noticed when Americans file their 2025 taxes in April. That combination keeps the consumer picture mixed, a setup that argues for patience rather than a rapid cutting cycle.
Data lineup and market tone
As for the labor market, the Labor Department will release delayed job openings numbers for October on Tuesday. Forecasts call for little change from the last release in August, which showed 7.2 million openings. A surprise uptick would weaken the case for rapid cuts, while a drop below 7 million would underline a cooler hiring landscape.
There is little other economic data, although the National Federation of Independent Business will release its small business optimism index on Tuesday. That is not expected to show much change as small firms bear the brunt of the Trump tariffs. Watch for any shift in planned compensation—an early tell on wage pressure.
The markets continue to edge higher, led by big-name technology stocks that are trading at elevated valuations on the notion of a growing boom in artificial intelligence. But there have been some wobbles of late as that narrative endures greater scrutiny. Our view: a clean press conference plus a soft JOLTS print would extend the rally, but stretched multiples leave little room for a hawkish surprise.
Trump is scheduled to visit Pennsylvania this week to address concerns over “affordability,” but whether he will offer any help to strapped consumers remains to be seen. Treasury Secretary Scott Bessent echoed his boss on Sunday when he blamed former President Joe Biden for the inflation that has persisted since Trump took office in January.
“The American people don’t know how good they have it,” Bessent said. “Now, Democrats created scarcity, whether it was in energy or over-regulation, that we are now seeing this affordability problem, and I think next year we’re going to move on to prosperity.”