Name: Federal Reserve interest rate cut expected. How will economy react?
Uploaded: 2025-12-10T14:41:42.106Z
Duration: 3 min 28 s
Description: The Federal Reserve is expected to announce an interest rate cut as the nation navigates an affordability crunch. Kristin Myers, the ETF editor-in-chief for Asset TV, joins with more.

The Federal Reserve is expected to announce an interest rate cut as the nation navigates an affordability crunch. Kristin Myers, the ETF editor-in-chief for Asset TV, joins with more.

New York

The Federal Reserve is anticipated to approve a quarter-point interest rate cut, with economists estimating an 88 percent likelihood of the move. However, the decision is marked by notable internal disagreement, with up to five dissenters expected—potentially the most in decades. The central bank faces the challenge of balancing its dual mandate of maximum employment and price stability, as inflation remains persistent and unemployment shows signs of weakening.

Limited economic data due to a recent government shutdown complicates the Fed's decision-making process. Additionally, Chair Jerome Powell's term ends in May, raising questions about future leadership and the central bank's independence, especially as political pressures mount for further rate cuts.

Federal Reserve interest rate cut expected. How will economy react?

A divided Fed meets today but another rate cut looks likely. Economists expect there will be at least three dissenters and as many as five, which would be the most in decades. But the central bank just needs a simple majority to cut rates. Now the CME Fed watch puts the odds of another quarter of a percentage point cut at 88 percent. So this is very likely, although not certain. Kristen Myers is back with us. She's the ETF editor-in-chief for AssetTV. She's here with me in studio to talk about what we can expect today. Kristen, always great to see you. Welcome back. Thank you. We have this quarter of a percent cut expected, but why is the Fed seemingly so divided over this path? I mean, well, we just heard that report, right, that there is still inflation. A lot of Americans don't feel like prices have come down. And so right now the Fed has essentially one of two mandates. They have two mandates, right? It's either maximum employment or try to stabilize prices. So take that inflation down. They have to figure out which one of those mandates they actually want to follow. Right now we still have inflation be a little bit persistent, as we just heard from some of those grocery shoppers. But then we do have unemployment weakening. So they have to decide, do we want to stimulate the economy, which could raise prices, or do we want to make sure that we bring that inflation down? So cutting rates by a quarter of a percentage point would be a step in which direction? What would that signal to the rest of us? That would mean they're focusing on unemployment, that they really want to make sure that the U.S. economy continues to grow and expand. So that's why it would be a very small cut, that 25 basis point cut. And the Fed has pretty much said, look, this might be a hawkish cut, meaning they might give you a cut today in December, but come January, come mid-March, come 2026, do not expect us to keep cutting rates in the new year. And what about the limited data that the Fed can make this decision with? We had the government shutdown, which lasted a number of weeks. The Labor Department will release some key reports next week. But aren't there real challenges with making this decision now? In a word, yes. I mean, if they don't have the full picture of how the economy is doing, how inflation is doing, how the jobs are doing right now, how unemployment is doing, then it just makes it that much harder to figure out, well, how is the actual U.S. economy faring right now, and where should we decide to put our focus? Fed Chair Jerome Powell's term as chair, it ends in May. How does that fact shape the decisions that we will see between now and then? Yeah, you know, you're going to see a lot of headlines that there's going to be a turbulent Fed in 2026, that there's going to be a lot of questions about the Fed's independence, because President Trump can essentially nominate another Fed chair. However, he's only going to have three seats, really, that he's been able to nominate. There's going to be 12 voting members, a full 19 in the Fed. So he doesn't have complete control over the Fed. However, again, it does call into question some of the independence, because he's pretty loudly proclaimed that, one, he doesn't like, you know, Fed Chair Powell. He's called him too late Powell. He's called him an idiot. He's called him all sorts of names. And that he really wants them to cut rates, because that stimulates the U.S. economy. And the U.S. economy being stimulated is something good for every single president, Republican or Democrat. They all want cut rates. So that's going to be the main question going forward next year. But again, he doesn't leave until May. We have several rate cut decisions. Many lifetimes to live. Exactly. And even. Krista Myers, great to have you walk us through all of this. Great to see you.

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