The 30-share Bombay Stock Exchange index, Sensex and the 50-share National Stock Exchange index, Nifty, climbed in early trade. File
| Photo Credit: Reuters

Sensex opened higher while the 50-share National Stock Exchange index, Nifty, also advanced. File
| Photo Credit: PTI

A divided U.S. Federal Reserve lowered interest rates on Wednesday (December 10, 2025) for a third consecutive time this year, but signaled that it could hold off further reductions in the coming months.

Fed Chair Jerome Powell said the central bank is “well positioned to wait and see how the economy evolves from here.”

The Fed’s statement on its decision also brought back language used in late-2024 to signal a pause in more rate cuts.

Mr. Powell stressed that officials are in a good position to determine the “extent and timing of additional adjustments based on the incoming data, the evolving outlook and the balance of risks.”

Wednesday’s (December 10, 2025) reduction by a quarter percentage point brings rates to a range between 3.50% and 3.75%, the lowest in around three years, a move aligned with market expectations.

The Fed penciled in one more rate cut next year, and flagged heightened risks to employment as it announced its latest decision.

But a rift within the central bank deepened with three officials voting against the modest reduction.

Chicago Fed president Austan Goolsbee joined Kansas City Fed president Jeffrey Schmid to support keeping rates unchanged. Fed Governor Stephen Miran again backed a bigger, half-percentage-point cut.

The Fed’s rate-setting committee has 12 voting members — including seven members of the board of governors, the New York Fed president and a rotation of reserve bank presidents — who take a majority vote in deciding on rates.

‘Close call’

Mr. Powell noted that some disagreement was expected, pointing to tensions between inflation risks and a weakening jobs market: “It’s a close call.”

“Inflation is well above the Fed’s target, but the job market appears to be softening,” said Mortgage Bankers Association chief economist Mike Fratantoni in a statement.

“Thus, there is ammunition for both sides of the debate” within the Fed, he added.

For now, Mr. Powell said, the Fed is “in the high end of the range of neutral” rates, with neutral being a level that neither stimulates nor restricts economic activity.

The Fed has previously described interest rates as “modestly restrictive” — “neutral” could suggest less justification to lower levels quickly.

“We expect the Fed will want to pause for a while to allow time to for this and prior cuts to feed through the economy,” said economist Ryan Sweet of Oxford Economics.

Mr. Powell added that the U.S. economy needs several years where wages are higher than inflation for “people to start feeling good about affordability.”

On Wednesday (December 10, 2025), Fed officials also lifted their 2026 growth forecast, while easing inflation expectations and keeping their unemployment rate projection unchanged.

These forecasts could shift as the central bank grapples with a delay in federal economic data releases after a record-long government shutdown.

Turbulent 2026

This week’s gathering is the last before 2026, a year of key changes for the bank. A new chief will arrive after Mr. Powell’s term ends in May, while political pressure mounts.

On Wednesday (December 10, 2025), Mr. Trump said the Fed could have “at least doubled” its rate cut.

The President also signaled in a Politico interview published on Tuesday (December 9, 2025) that he would judge Powell’s successor on whether they immediately slash rates.

Interviews for his choice are entering the final stages, and Mr. Trump’s chief economic adviser Kevin Hassett is among top contenders.

Miran’s term expires in January, creating an opening among the Fed’s top leadership. Mr. Trump has sought to free up another seat by attempting to fire Fed Governor Lisa Cook too.

Ms. Cook has challenged her ousting and the case remains before the courts.

EY-Parthenon chief economist Gregory Daco noted that Hassett’s potential appointment and a “more hawkish rotation of voting members” focused more on taming inflation means a growing dispersion in views.

“Policy deliberations are likely to become even more divided next year,” he said.

Published – December 11, 2025 09:44 am IST

An employee of a stock trading firm looking at a share price on his computer.
| Photo Credit: The Hindu

Benchmark indices Sensex and Nifty slumped in early trade on Thursday (December 19, 2024) following weak global market trends after the U.S. Federal Reserve indicated fewer rate cuts next year.

The 30-share BSE benchmark Sensex tanked 1,162.12 points to 79,020.08 in early trade. The NSE Nifty tumbled 328.55 points to 23,870.30.

All the 30 blue-chip stocks were trading lower. Infosys, State Bank of India, Tata Steel, Asian Paints, JSW Steel, Bajaj Finserv, Bajaj Finance and Mahindra & Mahindra were the biggest laggards.

In Asian markets, Seoul, Tokyo, Shanghai and Hong Kong were trading lower.

Wall Street ended sharply lower on Wednesday (December 18, 2024).

“When valuations are high the market needs only a trigger to correct sharply. This trigger was provided by the Fed guidance of fewer rate cuts in 2025, which went against market expectations. Even though the rate cut of 25 bps was in tune with the market’s expectation, the indication of only two cuts of 25 bps each in 2025 against market expectation of three or even four cuts spooked the market resulting in a sharp sell-off in Wall Street.

“The Fed chief’s comments regarding the economy and the labour market are, in fact, positive, suggesting a resilient U.S. economy. But always the market gets spooked when the reality falls short of expectations,” V.K. Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said.

Foreign Institutional Investors (FIIs) offloaded equities worth ₹1,316.81 crore on Wednesday, according to exchange data.

“The Federal Reserve cut its benchmark interest rate by 25 basis points, marking the third consecutive reduction this year, but bullish sentiment waned as the Fed lowered its 2025 projections to just two additional cuts,” Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd, said.

Global oil benchmark Brent crude dipped 0.40% to $73.10 a barrel.

The BSE benchmark Sensex tumbled 502.25 points or 0.62% to settle at 80,182.20, taking its downtrend to the third day on Wednesday. The Nifty declined 137.15 points or 0.56% to 24,198.85.