Federal Reserve's Year-End Showdown, "Hawkish Rate Cuts" Almost Certain

December 10th, at 3 a.m. Beijing time, the Federal Reserve will release this year’s final interest rate decision, revealing its difficult choices amid a “data vacuum” and internal disagreements. The expected rate cut may be accompanied by vague statements regarding the interest rate path for next year, possibly leaning hawkish. In addition to the anticipated rate cut, investors currently expect the Fed to implement two more 25 basis point cuts before the end of 2026, keeping the benchmark rate in the 3.00%-3.25% range. Morgan Stanley Chief U.S. Economist Michael Feroli said that hawkish views emerging from regional Fed presidents could keep the 2026 rate outlook consistent with September—despite the already low support for a rate cut this week, the threshold for further rate cuts has risen. Feroli stated that the new rate forecasts will “reflect unease about rate cuts,” and the policy statement may be adjusted to “suggest a lower likelihood of rate cuts at subsequent meetings,” while Powell will emphasize in the post-meeting press conference that “further rate cuts will only occur if the labor market deteriorates significantly.”