What to expect from the last Fed meeting of 2025 — and what a rate cut could mean for your wallet

The Federal Reserve will decide on a possible interest rate cut at its final 2025 meeting.
The government shutdown delayed economic data, making the central bank’s decision more difficult.
A rate cut could lower borrowing costs for mortgages and credit cards, bringing relief to consumers.

The Federal Reserve has one more decision in 2025 — and it will set the tone for where interest rates will go in the new year.

On Wednesday, leaders at the central bank will decide whether to continue cutting rates or put a pause on loosening monetary policy. The call will have ripple effects across consumer prices, the job market, and Corporate America. CME FedWatch predicted the Fed had a roughly 90% chance of a quarter-point cut on Monday.

But slicing rates isn’t a sure thing. The final Federal Open Market Committee meeting of 2025 will follow the record-long government shutdown, which upended job stability for federal workers and disrupted data releases, including on unemployment and inflation. Even with the government open again, federal agencies like the Bureau of Labor Statistics continue to delay or have canceled their reports. It leaves the Fed’s decision makers without a full picture of US economic health.

“The risk to the labor market’s still there, the risks to inflation are still there, neither of which are necessarily a cause for alarm right now,” Elizabeth Renter, senior economist at NerdWallet, told Business Insider, but “the picture is cloudy.”

Fed leaders are missing some key job and price data. Because BLS didn’t collect new data during the shutdown, the agency can’t publish the October consumer price index report or the October unemployment rate, and the November jobs report and inflation data won’t be released in time for the December meeting.

Renter said the murky economic picture may mean the Fed leans on last-minute data reports to make its decision. The job openings and labor turnover survey results and the employment cost index will be released on December 9 and December 10, respectively.

The delayed September jobs report that came out on November 20 showed that the US added more jobs than expected that month, and unemployment increased amid an increase in labor force participation. Cory Stahle, an economist at the Indeed Hiring Lab, told Business Insider that this doesn’t mean the job market is reinvigorated or that the Fed’s concerns over the labor market would immediately fade.

“We’re still off to one of the worst starts we’ve had since 2010 after you take out the pandemic,” Stahle said. Federal Reserve Chair Jerome Powell said in the last FOMC press conference that labor market conditions had “not changed much” between the Fed’s September and October meetings.

Claudia Sahm, the chief economist for New Century Advisors, expects the Fed to cut rates again, but wouldn’t be surprised if members then decide to hold off for a while to see how the economy evolves. She also said there hasn’t been much progress on cooling US inflation this year. After another cut to help with the job market, she expects a wait-and-see period before another rate cut, assuming there aren’t drastic labor market changes.

“I have a feeling that if all goes well in the economy, the Fed probably is not going to be doing a whole lot because they took steps right now to ensure against the worst outcomes,” Sahm said. “Then it’s just going to take time for the inflation to start moving back down.”

The Fed has kept monetary policy restrictive so far this year, holding rates steady until September. But not all Fed leaders agree. Minutes from recent meetings show that some FOMC members would prefer larger and more consistent interest rate cuts. It’s possible that monetary strategy could change in 2026, as Powell’s term ends in May. President Donald Trump — who has been a vocal advocate for rate cuts — is likely to nominate a new Fed chair in January.

A third consecutive cut would help make major purchases more affordable.

Thirty-year fixed mortgages, two-year auto loans, and credit card rates tend to fluctuate alongside the federal funds rate. And, while inflation remains above the Fed’s 2% goal, mortgage rates have largely cooled in recent months in anticipation of rate reductions.

A quarter-point cut could mean lower returns on investment for savers using high-yield savings accounts or certificates of deposit, though it would become cheaper to pay off credit cards. Lower rates would also make home equity lines and small business loans more accessible to Americans.

If there is a cut, Renter said it could be a positive sign for people applying to roles in the sluggish labor market: If job seekers “hear that the Fed is responding to an unfavorable labor market, that’s going to feel good to them; they may feel like relief is on the horizon,” she said.

Sustained rate cuts would bolster the job market by making it easier for businesses to borrow and invest money. This would free up more funds for companies to hire and pay employees, which could lead to higher consumer spending — all factors needed for a healthy economy.

Though Powell said the Fed will be careful to balance jobs goals with curbing inflation. A rate change is likely this week, but “not a foregone conclusion, far from it,” he said. “Policy is not on a preset course.”

Read the original article on Business Insider

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