On December 30 Eastern Time, the Federal Reserve's official website released the minutes of the November monetary policy meeting:
Key points from the meeting minutes:
Most participants supported a rate cut in December. Some who supported the rate cut indicated that this decision was finely balanced, and they could have equally supported maintaining the interest rate unchanged. Most participants believed that further easing of monetary policy would be appropriate if inflation declined over time.
The economic growth forecast by the Federal Reserve staff is slightly higher than the expectations at the October meeting.Some participants noted that after a December rate cut, it would be appropriate to maintain stable interest rates 'for some time.'
Several participants pointed out that the risk of persistently high inflation might become entrenched, and suggested that further rate cuts could be misinterpreted as a lack of commitment by the Federal Reserve to its 2% inflation target.
Participants believed that reserve balances had fallen to an adequate level, and considered it appropriate to begin managing reserves through the purchase of U.S. Treasuries.
Most participants noted that shifting to a more neutral policy stance would help prevent potential deterioration in the labor market.
A few participants believed that a rate cut in December was not justified.
The following is the full text of the Federal Reserve's meeting minutes.
The Federal Open Market Committee and the Board of Governors of the Federal Reserve System held a joint meeting at the Board’s office on Tuesday, December 9, 2025, at 9:00 AM and reconvened on Wednesday, December 10, at 9:00 AM¹.
Financial Market Dynamics and Open Market Operations
The market manager first provided an overview of overall market developments during the inter-meeting period. Market participants did not make significant adjustments to their macroeconomic outlook, continuing to interpret the data released during the period as a sign of economic resilience. Expectations regarding the policy rate path, whether market-based or survey-based, showed little overall change. Both market participants and respondents to the Open Market Trading Desk’s Survey of Market Participants (Desk survey) generally anticipated that the FOMC meeting in December would lower the target range for the federal funds rate by 25 basis points. The modal expectation from the survey and option pricing suggested there would likely be two additional rate cuts next year.
Subsequently, the market manager discussed dynamics in the Treasury market and market-based inflation compensation measures. During the inter-meeting period, Treasury yields rose slightly overall but remained within recent ranges. Inflation compensation declined, with particularly pronounced drops for shorter maturities. The manager attributed the decline in short-term inflation compensation to lower energy prices and some market participants reassessing the potential impact of tariffs on short-term inflation. In contrast to market-based inflation compensation, survey-based and model-based inflation expectations remained largely unchanged during the period.
Overall stock price indices experienced significant volatility but showed little net change. Stock prices were sensitive to economic data and communications from policymakers, while developments related to artificial intelligence (AI) further increased volatility in the share prices of large technology companies. The manager noted that capital expenditures on AI-related equipment and infrastructure by several large technology companies accelerated this year, with these firms increasingly relying on debt to finance such spending.
Regarding international developments, the trade-weighted dollar index was largely unchanged during the inter-meeting period. External forecasters continued to expect modest depreciation of the dollar next year. Most forecasters believed that reductions in U.S. policy rates would exceed those in other advanced economies, but their confidence in this view weakened due to the resilience of the U.S. economy.
The manager stated that money market conditions tightened further during the inter-meeting period. Staff assessments indicated that the current environment aligned with reserves declining to the lower end of the ample reserve regime. Treasury repurchase agreement (repo) rates remained relatively high and volatile during the period. Investors attributed persistently elevated repo rates to reduced available liquidity and ongoing substantial issuance of Treasury securities. Rising repo rates, combined with shrinking reserve balances, continued to widen the spread between the effective federal funds rate (EFFR) and the interest rate on reserve balances. The manager pointed out that over the past few months, the correlation between this spread and reserve balances had increased significantly, and EFFR had risen faster than during the previous balance sheet reduction cycle. Consistent with elevated repo rates, usage of overnight reverse repurchase operations remained low, while the frequency and scale of standing repo operations increased during the period. Other key indicators of reserve adequacy—such as the proportion of late-day bank payment behavior and domestic banks’ borrowing in the federal funds market—also suggested that reserves remained ample.
Next, the manager discussed the expected trajectory of key components of the Federal Reserve's balance sheet. Over the coming months, seasonal fluctuations in non-reserve liabilities are projected to lead to significant declines in reserves at the end of December, the end of January, and especially in mid-to-late April, assuming the size of the System Open Market Account (SOMA) securities holdings remains unchanged. The manager highlighted that the anticipated drop in reserves due to tax inflows into the Treasury General Account (TGA), a liability of the Federal Reserve, would be particularly pronounced in April. If the SOMA portfolio size remains constant, reserves might fall below the ample reserve level.
In light of the expected decline in reserves and recent money market dynamics, the manager recommended that the Committee consider initiating reserve management purchases (RMPs) this month to maintain an ample level of reserves continuously. Given the projected sharp decline in reserves in mid-to-late April, the manager suggested starting reserve management purchases soon, maintaining a high net purchase pace before that point, followed by a substantial reduction in monthly purchase sizes afterward. Respondents to the Desk survey anticipated that reserve management purchases would begin shortly, with over one-third expecting an announcement at this meeting and initiation next month, while the majority expected implementation by the end of the first quarter of 2026. Although estimates of expected purchase sizes varied widely among respondents, on average, they anticipated a net purchase volume of approximately $220 billion over the first 12 months.
The manager then discussed standing repo operations and their central role in supporting monetary policy implementation. Despite a recent increase in the use of such operations, on some trading days, a significant volume of repo trades occurred well above the minimum bid rate for the operation, indicating reluctance among some potential participants to engage in standing repo operations. Market communications revealed that this hesitancy stemmed from misunderstandings about the intended purpose of standing repo operations. Clarifying through communication that these operations aim to support monetary policy implementation could enhance their effectiveness. Market participants also indicated that part of their reluctance to use standing repo operations stemmed from specific operational features, offering several suggestions to improve their efficacy, such as enabling centralized clearing and removing the daily aggregate limit of $500 billion. Given the importance of standing repo operations in monetary policy implementation, the manager proposed clarifying their intended role in official communications, conveying the expectation that they can be used “when economically rational,” and eliminating the aggregate limit.
By unanimous vote, the Committee approved the domestic trading operations conducted by the Desk during the inter-meeting period. No foreign exchange intervention operations were conducted for system accounts during the period.
Thematic Discussion: Balance Sheet-Related Issues
Participants discussed the dynamics of the money market and whether it was necessary to initiate reserve management purchases to maintain reserve levels consistent with the ample reserves framework outlined in the Committee’s 2019 Statement on Monetary Policy Implementation and Balance Sheet Normalization. As the spread between money market rates and administered rates continued to widen, along with other indicators showing tightening conditions in the money market, participants assessed that reserve balances had fallen below the ample level. Therefore, they deemed it appropriate to begin reserve management purchases by purchasing short-term Treasury securities to sustain an ample supply of reserves over the long term.
Prior to the discussion, the staff presented a thematic report. The staff emphasized that multiple levels of reserve balances could meet the definition of “ample” and displayed indicators showing that money market conditions suggested reserves were within the ample range. Specifically, since mid-September, the spread between the effective federal funds rate and other money market rates relative to the interest rate on reserve balances had risen relatively quickly. Additionally, several other indicators of liquidity in short-term funding markets — including the volatility of repo rates and their sensitivity to Treasury coupon issuance — also indicated that reserves were within the ample zone. The staff highlighted the role of the standing repo facility in ensuring that the federal funds rate remained within the target range, even on days with high demand for non-reserve liabilities. They also pointed out the impact of fluctuations in reserves within the ample range on money market volatility, market functioning, the size of the Federal Reserve's balance sheet, and the usage of standing repo operations.
The staff noted that sustaining an ample level of reserves over the long term would require expanding the SOMA securities portfolio to accommodate trend growth in both reserve and non-reserve liabilities. Moreover, under the ample reserves framework, the size of the SOMA portfolio needed to be sufficient to handle significant seasonal fluctuations in non-reserve liabilities (such as those triggered by variations in TGA balances). The staff presented various options for structuring reserve management purchase operations at the trading desk, highlighting the benefits of granting the trading desk flexibility to adjust purchase sizes based on expected or actual fluctuations in reserve and non-reserve liability demands. The staff also stated that, in line with the goal of returning to a “Treasury-dominated portfolio” as outlined in the Committee’s 2022 Principles for Reducing the Size of the Federal Reserve's Balance Sheet and to align with the preference for adjusting the SOMA portfolio composition towards marketable Treasury securities, reserve management purchases could primarily be conducted through Treasury bills.
Participants unanimously agreed that recent developments in money market conditions indicated that reserves were within the ample range, and that initiating reserve management purchases to maintain an ample supply of reserves was a prudent step. Some participants noted that the recent increase in the spread between the effective federal funds rate and the interest rate on reserve balances occurred more rapidly than during the Federal Reserve's balance sheet reduction period from 2017 to 2019. Others pointed out that the average tri-party repo rate was slightly above the interest rate on reserve balances. Participants favored purchasing Treasury bills to allow the SOMA portfolio composition to gradually shift toward marketable Treasury securities but did not make any decisions regarding the long-term portfolio composition. Policymakers generally emphasized the need to communicate clearly that reserve management purchases were solely intended to ensure interest rate control and smooth market functioning, and were unrelated to the stance of monetary policy.
Participants widely agreed that, given the significant fluctuations in the demand for Federal Reserve liabilities and the uncertainty surrounding related forecasts, it was crucial to grant the trading desk flexibility in adjusting the scale and timing of reserve management purchases. In discussing how to structure these purchases amid such volatility, some participants stressed a preference for increasing purchase volumes in advance to ensure that the overall supply of reserves in the market could adequately address large anticipated seasonal fluctuations in non-reserve liabilities without relying heavily on standing repo operations. However, others preferred conducting reserve management purchases around periods of high non-reserve liability demand while relying more on standing repo operations to alleviate upward pressure on interest rates in order to contain the size of the balance sheet. Some participants cited research by Federal Reserve staff indicating that aligning fluctuations in SOMA Treasury bill holdings with fluctuations in non-reserve liabilities could isolate reserve supply from the effects of TGA changes.
Participants also discussed the role of standing repo operations and shared views on their importance in interest rate control under the ample reserves regime. Some participants emphasized a preference for standing repo operations to play a more active role in interest rate control, being utilized heavily during periods of heightened money market stress. Others added that effective standing repo operations might help maintain a smaller average balance sheet size. Some participants, however, favored relying more on reserve management purchases to sustain an ample level of reserves.
Several participants noted that providing a more precise definition of “ample” would help clarify the Committee’s intent in implementing the ample reserves framework. A few participants noted the difficulty in setting an appropriate reserve target level due to potential changes in reserve demand. Some participants believed that the definition of “ample reserves” should focus on the level of money market rates relative to the interest rate on reserve balances, with some emphasizing that this approach could avoid certain challenges associated with setting specific reserve target levels given the potential variability in reserve demand. Others expressed concern that if the definition of “ample reserves” resulted in reserve supply exceeding the level required to implement the Committee’s framework, it might encourage excessive risk-taking by leveraged investors.
Staff Review of Economic Conditions
Information available at the time of the meeting indicated that real gross domestic product (GDP) expanded modestly this year. The unemployment rate edged up in September, and job gains slowed; recent labor market indicators were consistent with these trends. Consumer price inflation had risen since earlier this year and remained relatively elevated.
The unemployment rate edged up to 4.4% in September, continuing the gradual upward trend that has been evident since mid-year. The pace of monthly growth in nonfarm payroll employment during the third quarter remained slower than at the beginning of the year. Other available labor market indicators—including initial claims for unemployment insurance, the vacancy rate and layoff rate, and household and business perceptions of labor supply-demand balance—all point to a gradual cooling of labor market conditions since September. Over the 12 months ending in September, the Employment Cost Index for total private-sector labor compensation rose by 3.5%, while average hourly earnings for all employees increased by 3.8%. Both measures of wage growth were close to their levels from the previous year.
Overall consumer price inflation, as measured by the 12-month change in the Personal Consumption Expenditures (PCE) price index, stood at 2.8% in September. Core PCE price inflation, which excludes consumer energy prices and most consumer food prices, was also 2.8% in September. Both overall and core PCE price inflation were higher than earlier in the year. Core services price inflation declined, but core goods price inflation rebounded, with staff attributing this primarily to the impact of higher tariffs.
Available indicators suggest that real GDP growth was robust in the third quarter, but the average growth over the first three quarters of the year was moderate and slower than in 2024. Real private domestic final purchases (including personal consumption expenditures and private fixed investment expenditures, which often better reflect the underlying momentum of the economy than GDP) grew faster than GDP during the first three quarters, though still slower than last year. Real goods imports fell in August, reversing the increase seen in the previous month, while real goods exports continued to decline slightly. The federal government shutdown is expected to reduce real GDP growth in the fourth quarter by about 1 percentage point, with output growth recovering correspondingly in the first quarter of 2026.
Foreign economic activity in the third quarter continued to expand below trend rates, with contractions in real GDP in Mexico and Japan and weak growth in Europe. In contrast, buoyed by strong external demand for high-tech products and Chinese firms expanding exports to markets outside the United States, economic activity in emerging Asia remained solid.
Driven by the fall in global energy prices since the beginning of the year, overall inflation rates in many foreign economies have remained close to central bank targets, although core inflation in some economies remains persistently high. A few foreign central banks, including the Bank of Canada and the Bank of Mexico, lowered policy rates, while the majority kept rates unchanged.
Staff Review of Financial Conditions
During the intermeeting period, market-based expectations for the path of the federal funds rate and nominal Treasury yields increased modestly overall. The changes in nominal yields reflected increases in real yields, while inflation compensation decreased slightly, with more pronounced declines in shorter maturities. Overall stock prices were largely unchanged. The one-month implied volatility of the S&P 500 index reached its highest level since early April but ended the period roughly unchanged from the start. Spreads on investment-grade and speculative-grade corporate bonds widened somewhat but remained low.
In foreign financial markets, long-term yields rose significantly during the intermeeting period due to country-specific factors, including stronger-than-expected employment growth in Canada, rising prospects for further monetary tightening and expanded fiscal policy in Japan, and stronger-than-expected economic activity data in the eurozone, which was interpreted as signaling reduced easing intentions by the European Central Bank. Foreign stock indices and the broad dollar index were largely unchanged overall.
Conditions in U.S. short-term funding markets remained orderly but tightened overall compared with the previous intermeeting period. In secured markets, liquidity conditions tightened overall due to strong Treasury issuance, declining reserve balances in recent months, and month-end pressures. Reserve balances averaged around $2.9 trillion during the intermeeting period, approximately $500 billion lower than when the Federal Reserve began reducing its balance sheet in June 2022.
In domestic credit markets, conditions for businesses, households, and municipalities remained largely unchanged overall. Financing conditions for households and small businesses remained relatively tight, while medium and large firms continued to access credit markets at a steady pace. Credit performance remained largely stable, with delinquency rates remaining elevated for small businesses, commercial real estate (CRE), and consumer loans. Corporate bond yields increased somewhat, while the rates on 30-year fixed-rate conforming mortgages and non-agency commercial mortgage-backed securities (CMBS) rose moderately.
Most enterprises, households, and municipal authorities continue to have access to credit overall. Bank lending has expanded steadily, with active issuance in both public and private credit markets, and relatively high interest rates appear not to have significantly restrained borrowing behavior in these markets. In contrast, credit growth indicators for households and small businesses remain weak due to elevated borrowing costs.
Credit performance in most markets has remained largely unchanged. Following two highly publicized bankruptcy filings in the fall, there are no signs of deterioration in the credit quality of corporate bonds and leveraged loans. There were no defaults on non-financial corporate bonds in September and October, bringing the 12-month rolling default rate below the 35th percentile of the post-global financial crisis distribution. The 12-month rolling default rate for leveraged loans in October declined slightly but remains at a high level. The default rate for commercial real estate loans by banks in the third quarter was largely unchanged and remains above pre-pandemic levels, while the default rate for commercial mortgage-backed securities has been moving sideways since the beginning of the year. Credit performance indicators for household debt have remained largely stable in recent periods.
Staff Economic Outlook
Compared to the projections formulated during the October meeting, real GDP growth is expected to accelerate slightly through 2028, primarily driven by greater support from financial market conditions and a modest strengthening in the outlook for potential output growth. After 2025, as the drag from tariffs diminishes and fiscal policy alongside financial market conditions continues to support spending, GDP growth is projected to remain above potential through 2028. Consequently, the unemployment rate is expected to decline gradually after this year, reaching slightly below the staff's estimate of the natural rate of unemployment by 2027.
The staff’s inflation projections for 2025 and 2026 are slightly lower than those from the October meeting, while projections for 2027 and 2028 remain broadly unchanged. Tariff increases this year and next are expected to continue exerting upward pressure on inflation. Thereafter, inflation is projected to return to its previous disinflationary trend, reaching the 2% target level by 2028.
The staff continues to view the uncertainty surrounding the forecast as high, citing factors such as cooling labor markets, persistently high inflation, and uncertainties regarding government policy changes and their economic impacts. Risks to employment and real GDP growth forecasts are still seen as skewed to the downside, as weakening labor markets and rising economic uncertainty could lead to a sharper-than-expected economic slowdown. Risks to the inflation forecast remain tilted to the upside, as upward price pressures this year and next, following more than four consecutive years of inflation above 2%, may make inflation stickier than anticipated by the staff.
Participants’ Views on Current Conditions and the Economic Outlook
In conjunction with this FOMC meeting, participants submitted their projections for the most likely outcomes for real GDP growth, unemployment, and inflation for each year from 2025 to 2028 and over the longer run. These projections were based on participants' individual assessments of appropriate monetary policy, including their forecasts for the federal funds rate. Participants also provided personal evaluations of the uncertainty and risk balance surrounding their projections. The Summary of Economic Projections was released to the public following the meeting.
Participants noted that headline inflation had increased since earlier this year as of September and remained slightly above the Committee’s long-term goal of 2%, though recent inflation data had not yet been published by the government. Many participants indicated that higher tariffs had raised goods prices, which in turn contributed to core inflation, although some pointed out that housing services inflation had fallen to levels close to those when inflation was sustained at 2%. Some participants commented that inflation in certain non-market service categories was affected by idiosyncratic factors, making it difficult to clearly reflect overall inflationary pressures. Most participants noted that headline inflation had remained above target for an extended period and had not moved closer to the 2% target over the past year.
Regarding the inflation outlook, participants generally expected inflation to remain relatively high in the near term before gradually returning to 2%. Many emphasized that the impact of tariffs on core goods inflation was expected to wane over time, although some expressed uncertainty about when this effect would dissipate or to what extent tariffs would ultimately pass through to final goods prices. Some participants noted that their business contacts reported persistent input cost pressures unrelated to tariffs, though several added that weak demand limited some firms’ ability to raise prices or that productivity gains might allow some businesses to absorb these cost pressures. Most participants anticipated that housing services would continue to contribute to disinflation, with a few expecting core non-housing services to do the same. Participants broadly judged that inflation risks remained tilted to the upside, though some noted that these upside risks had moderated. Some participants highlighted the risk that high inflation could prove more persistent than expected.
The participants noted that long-term inflation expectations based on market and survey data remained stable. A few participants indicated that short-term inflation expectations had risen earlier in 2025 but have since receded from their peak. Participants emphasized that maintaining well-anchored long-term inflation expectations is crucial for helping inflation return to the Committee's 2% target in a timely manner, with some expressing concern that inflation persisting above target for too long could lead to an increase in long-term expectations.
Regarding the labor market, participants observed continued softness in labor market conditions, with a slight rise in the unemployment rate in September. Participants relied on private-sector data, limited government data, and information provided by businesses and community contacts to assess recent labor market conditions. Most participants noted that some of the latest labor market indicators (including survey-based measures of job availability or planned layoffs) suggested ongoing weakness. However, some participants pointed out that other indicators (such as weekly initial claims for unemployment benefits and job postings) showed more stability. Several participants commented that low-income households were particularly concerned about their employment prospects. Participants observed that hiring activity remained subdued, with some citing survey-based indicators or reports from business contacts indicating that current hiring plans remain inactive. Participants generally agreed that the lack of labor market dynamism reflected both a decline in labor demand or cost-control efforts by firms amid economic uncertainty and a reduction in labor supply due to decreased immigration, an aging population, or a decline in labor force participation.
Participants generally assessed that, under appropriate monetary policy, the labor market would likely stabilize next year, but noted significant uncertainty in their outlook for the labor market, especially given delays in the release of government data. Most participants judged that risks to the labor market remained skewed to the downside. Some participants noted that rising unemployment rates among groups historically more sensitive to cyclical changes in the economy, layoffs in a low-hiring environment potentially leading to a sharp rise in the unemployment rate, or employment growth concentrated in a few less cyclical industries could indicate greater vulnerability in the labor market.
Participants observed that overall economic activity appeared to be expanding at a moderate pace. Many participants viewed aggregate consumer spending as solid, although some noted signs of a recent slowdown. Most participants cited evidence of stronger spending growth among higher-income households, while lower-income households, affected by cumulative price increases for essential goods and services over the past few years, were becoming increasingly price-sensitive and adjusting their spending behavior. Some participants noted early signs of stabilization in the housing sector, with recent declines in mortgage rates expected to provide support. Some participants commented that robust business fixed investment also supported economic activity, with several pointing to particularly strong investment in the technology sector. Some participants noted that despite rising prices for many agricultural products over the past year, the agricultural sector remained under pressure due to high input costs or reduced capacity in food processing. Several participants highlighted that government shutdowns could lead to volatility in economic activity indicators, making it more challenging to gauge underlying trends in economic growth in the coming months.
Participants generally anticipated that economic growth would accelerate in 2026, with economic activity expanding at a pace roughly in line with potential output over the medium term. Many participants expected growth to be supported by fiscal policy, regulatory changes, or relatively favorable financial market conditions. Nonetheless, participants judged that there was considerable uncertainty surrounding their forecasts for real GDP growth. Additionally, several participants noted that structural factors such as technological advances and productivity improvements (potentially reflecting increased adoption of artificial intelligence) could boost economic growth without triggering price pressures, though they might also dampen job creation. These participants noted that it could be difficult to determine the extent to which economic conditions reflect such structural factors rather than cyclical ones in real time.
In considering monetary policy at this meeting, participants noted that inflation had risen since earlier in the year and remained relatively elevated. Available indicators showed that economic activity was expanding at a moderate pace, job growth had slowed this year, and the unemployment rate had edged up in September. Recent indicators were consistent with these developments, and downside risks to employment had increased in recent months.
Against this backdrop, most participants supported lowering the target range for the federal funds rate at this meeting, while some preferred to maintain the current range. Some who supported a rate cut at this meeting noted that the decision was finely balanced or that they might have been inclined to maintain the current range. Participants supporting the reduction in the target range for the federal funds rate generally viewed the decision as appropriate because downside risks to employment had risen in recent months, and upside risks to inflation had diminished or remained largely unchanged since early 2025. Some of these participants emphasized that lowering the target range at this meeting was consistent with a forward-looking pursuit of the Committee’s dual mandate objectives, noting that a rate cut at this meeting aligns with projections of declining inflation in the coming quarters while also supporting economic activity in 2026 and stabilizing labor market conditions after a cooling period earlier this year. Participants who favored maintaining the current target range expressed concerns that progress toward the Committee’s 2% inflation goal had stalled in 2025 or argued that more confidence was needed that inflation would continue to fall back to the Committee’s target level. These participants also noted that if inflation does not return to 2% in a timely manner, long-term inflation expectations could rise. Some participants who supported or might have supported maintaining the current range suggested that a substantial amount of labor market and inflation data would be released during the inter-meeting period, which could help inform whether a rate cut is warranted. A few participants viewed the reduction in the target range at this meeting as unwarranted, as incoming data did not show any significant further weakening in the labor market. One participant agreed on the need to move toward a more neutral monetary policy stance but preferred a 0.5 percentage point reduction in the target range at this meeting.
In considering the outlook for monetary policy, participants expressed differing views on the restrictive nature of the Committee’s policy stance. Most participants judged that further reductions in the target range for the federal funds rate may be necessary if inflation declines as expected over time. Regarding the magnitude and timing of further adjustments to the target range, some participants indicated that, based on their economic outlook, it may be appropriate to maintain the target range unchanged for a period following this meeting’s adjustment. A few participants noted that this approach would allow policymakers to assess the lagged effects of the Committee’s recent shift toward a more neutral policy stance on the labor market and economic activity, while also allowing time to gain more confidence that inflation will return to 2%. All participants agreed that monetary policy is not on a preset course and will be adjusted based on a broad range of incoming data, evolving economic outlook, and the balance of risks.
In discussing risk management considerations that could influence the outlook for monetary policy, participants generally judged that upside risks to inflation remained elevated, while downside risks to employment were high and had increased since mid-2025. Most participants noted that moving toward a more neutral policy stance would help mitigate the risk of a significant deterioration in labor market conditions. Many of these participants also judged that available evidence suggested a reduced likelihood of sustained inflationary pressures resulting from tariffs. These participants stated that the Committee should ease its policy stance in response to downside risks to employment, thereby helping to better balance the risks associated with achieving the dual mandate objectives, and noted that this meeting’s adjustment toward a more neutral policy stance would position policymakers well to determine the magnitude and timing of further adjustments to the policy rate based on incoming data, evolving outlook, and the balance of risks. In contrast, some participants highlighted the risk that elevated inflation could become entrenched and noted that further rate cuts amid high inflation readings could be misinterpreted as a weakening of policymakers’ commitment to the 2% inflation target. Participants judged that various risks need to be carefully balanced and unanimously agreed that maintaining well-anchored long-term inflation expectations is critical to achieving the Committee’s dual mandate objectives.
Committee Policy Actions
In discussing the monetary policy decision of this meeting, members unanimously noted that available indicators showed economic activity expanding at a moderate pace. Employment growth has slowed this year, with a slight increase in the unemployment rate in September; recent indicators are consistent with these developments. Inflation has risen since earlier this year and remains relatively high. Members agreed that the Committee is attentive to risks on both sides of its dual mandate, and downside risks to employment have increased in recent months.
To support the Committee’s objectives and in light of changes in the balance of risks, nine members agreed to lower the target range for the federal funds rate by 25 basis points to 3.5% to 3.75%. Three members dissented from the decision: two preferred to keep the target range unchanged, while one favored a 50-basis-point reduction. Members agreed that, in considering the magnitude and timing of further adjustments to the target range for the federal funds rate, the Committee would carefully assess incoming data, evolving outlooks, and the balance of risks. All members agreed that the post-meeting statement should convey this judgment regarding further interest rate adjustments and reaffirm the Committee's steadfast commitment to supporting maximum employment and bringing inflation back to the Committee’s 2% objective.
Members agreed that, in assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. Should risks emerge that could impede the achievement of the Committee’s objectives, the Committee will be prepared to adjust the stance of monetary policy as appropriate. Members also agreed that their assessments will take into account a wide range of information, including labor market conditions, readings on inflation pressures and inflation expectations, and financial and international developments.
In light of the discussion on balance sheet-related issues during the meeting, members agreed that reserve balances had declined to an ample level, and the Committee would initiate purchases of short-term Treasury securities as needed to sustain an ample supply of reserves. Members also agreed to eliminate the aggregate cap on standing repurchase operations.
At the conclusion of the discussion, the Committee voted to authorize the Federal Reserve Bank of New York to execute SOMA transactions under the following domestic policy directive until otherwise notified, to be released at 2:00 PM:
“Effective December 11, 2025, the Federal Open Market Committee directs the Desk to:
Conduct necessary open market operations to maintain the federal funds rate within the target range of 3.5% to 3.75%;
Conduct overnight reverse repurchase operations at an offering rate of 3.75%;
Conduct overnight repurchase operations at a bid rate of 3.5%, with a per-counterparty daily limit of $160 billion;
Increase the System Open Market Account’s holdings of securities by purchasing Treasury bills (and, if necessary, other Treasury securities with remaining maturities of up to three years) to sustain an ample level of reserves.”
Reinvest all principal payments from the Federal Reserve’s holdings of Treasury securities in new Treasury auctions; reinvest all principal payments from the Federal Reserve’s holdings of agency securities into Treasury bills.
The vote also included approval of the following statement to be released at 2:00 PM:
Available indicators show that economic activity has expanded at a moderate pace. Job gains have slowed this year, and the unemployment rate edged up in September. Recent indicators are consistent with these developments. Inflation has risen since earlier this year and remains relatively high.
The Committee seeks to achieve maximum employment and an inflation rate of 2% over the long run. Uncertainty surrounding the economic outlook remains high. The Committee is attentive to risks on both sides of its dual mandate and judges that downside risks to employment have increased in recent months.
To support its goals and in light of changes in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 25 basis points to 3.5% to 3.75%. In considering the extent and timing of future adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee is firmly committed to supporting maximum employment and returning inflation to its 2% objective.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. If risks emerge that could impede the attainment of the Committee's goals, it will be prepared to adjust the stance of monetary policy as appropriate. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
The Committee judges that reserve balances have declined to ample levels and will initiate purchases of short-term Treasury bills as needed to maintain an ample supply of reserves on an ongoing basis.
Voting for this action: Jerome H. Powell (Chair), John C. Williams (Vice Chair), Michael S. Barr, Michelle W. Bowman, Susan M. Collins, Lisa D. Cook, Philip N. Jefferson, Alberto G. Musalem, Christopher J. Waller.
Voting against this action: Stephen I. Milan (preferred a 50-basis-point cut in the target range for the federal funds rate at this meeting), Austin D. Goolsbee, and Jeffrey R. Schmid (preferred to leave the target range for the federal funds rate unchanged).
In conjunction with the Committee’s decision to lower the target range for the federal funds rate to 3.5% to 3.75%, the Board of Governors of the Federal Reserve System unanimously voted to lower the interest rate on reserve balances to 3.65%, effective December 11, 2025. The Board of Governors of the Federal Reserve System also unanimously voted to lower the primary credit rate by 25 basis points to 3.75%, effective December 11, 2025².
The committee agreed that the next meeting will be held from Tuesday, January 27, 2026, to Wednesday, January 28, 2026. The session adjourned at 10:30 a.m. on December 10, 2025.
Written vote
Through a written vote completed on November 18, 2025, the committee unanimously approved the minutes of the meeting held on October 28-29, 2025.
Attendees
Jerome H. Powell (Chair)
John C. Williams (Vice Chair)
Michael S. Barr
Michelle W. Bowman
Susan M. Collins
Lisa D. Cook
Austin D. Goolsbee
Philip N. Jefferson
Stephen I. Miller
Alberto G. Musalem
Jeffrey R. Schmidt
Christopher J. Waller
Alternate members of the committee: Beth M. Hammack, Neel Kashkari, Lori K. Logan, Anna Paulson, Sushmita Shukla
Notes
In this summary, the Federal Open Market Committee is referred to as 'FOMC' or 'the Committee,' and the Board of Governors of the Federal Reserve System is referred to as 'the Board.'
The Board approved the interest rate setting requests submitted by the boards of directors of the Federal Reserve Banks of New York, Philadelphia, St. Louis, and San Francisco. This vote also included the approval for other Federal Reserve Banks to set the primary credit rate at 3.75%, effective from December 11, 2025, or upon notification to the Secretary of the Board. (Secretary's note: Subsequently, the Federal Reserve Banks of Boston, Cleveland, Richmond, Atlanta, Chicago, Minneapolis, Kansas City, and Dallas were notified that their requests to set the primary credit rate at 3.75% had been approved by the Board, effective from December 11, 2025.)
Attended discussions on economic and financial conditions until the conclusion of the Wednesday meeting.
Attended until the conclusion of the discussion on the balance sheet issues.
Only attended the meeting on Tuesday.
Attended until the conclusion of the discussions on the balance sheet issues and monetary policy.
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