Federal Reserve Chair Jerome Powell speaks during a press conference following the Federal Open Markets Committee meeting at the Federal Reserve on Dec. 10, 2025 in Washington, DC.
Chip Somodevilla | Getty Images
It ended up being a “hawkish cut,” as expected. Still, investors managed to find a few gifts tucked between the lumps of coal.
Even though the U.S. Federal Reserve lowered interest rates by a quarter percentage point on Wednesday stateside, two regional bank presidents — Jeffrey Schmid of Kansas City and Austan Goolsbee of Chicago — wanted rates to stand pat.
Their caution was echoed in the Fed’s “dot plot” of rate projection, which showed officials penciling in just one cut in 2026 and another for 2027.
Even the Fed’s rate statement was repurposed from the December 2024 meeting, which ushered in a nine-month period without cuts until September this year.
Why, then, did U.S. markets rise after the meeting?
The biggest surprise was the Fed’s announcement that it would begin purchasing $40 billion in Treasury bills, starting Friday. That move increases the money supply in the economy. In other words, it’s a stealthy way to ease conditions, which helps support financial markets.
Next, Chair Jerome Powell dismissed speculation about future hikes.
“I don’t think that a rate hike … is anybody’s base case at this point,” Powell said. “I’m not hearing that.”
Fed officials also see the U.S economy as remaining resilient. Collectively, they increased their forecast for economic expansion in 2026 to 2.3% from an earlier estimate of 1.8% in September.
“We have an extraordinary economy,” said Powell.
And the markets may be setting up for an extraordinary finish to the year.
“The last interest rate decision of 2025 has essentially paved the way for a Santa Claus rally to end the year, and the S&P 500 is poised to exceed the 7,000 milestone in the next few weeks,” said José Torres, senior economist at Interactive Brokers.
For investors, that would count as a very decent Christmas surprise.
— CNBC’s Jeff Cox contributed to this report.
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And finally…
Anduril flies its unmanned drone YFQ-44A for the first time at an unspecified location in California, U.S., Oct. 31, 2025 in this handout image.
Anduril | Via Reuters
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