Yeliz Akmaca 
The Federal Reserve (Fed) lowered its policy interest rate by 25 basis points as expected, bringing the target range to 3.5%-3.75% during its December 2025 meeting. The Federal Open Market Committee (FOMC) stated that this decision is appropriate after assessing the economic outlook and risks. Following the announcement, the Fed revealed it will start purchasing Treasury securities on December 12 and will buy a total of $40 billion in the next 30 days.
Economic Outlook and Inflation Expectations
The FOMC noted that economic activity continues to expand at a moderate pace. Although employment growth has slowed, the unemployment rate remained low through September. Inflation has risen this year and remains somewhat elevated. The Committee reaffirmed its commitment to maximum employment and a long-term 2% inflation target.
Fed policymakers project core PCE inflation at 2.5% and overall PCE at 2.4% by the end of 2026, down from previous forecasts of 2.6% in both categories. Unemployment is projected at 4.5% for 2025 and 4.4% for 2026. According to the median projection, interest rates are expected to reach 3.1% by the end of 2028.
Securities and Reserves
The FOMC decided to end the reduction of total securities holdings as of December 1. Reserve balances are assessed to be ample, and the Fed indicated it may begin purchasing shorter-term Treasury securities if needed to maintain sufficient reserves. The Committee will continue monitoring incoming data to evaluate the appropriate stance of monetary policy.
Voting Results
The policy decision passed with a 9-3 vote. Schmid and Goolsbee voted to keep rates unchanged, while Miran favored a half-point rate cut. Additionally, four Fed officials forecast an additional two-quarter-point rate cut for 2026.
Bitcoin and U.S. Stock Market Reaction
Following the decision, Bitcoin briefly fell below $92,000 but quickly recovered above $93,000. U.S. stock indices moved higher, with the Dow Jones up 0.62%, S&P 500 up 0.26%, and Nasdaq up 0.03%. Investors are closely watching the Fed’s rate cut and Treasury purchases.
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The Fed will purchase $40 billion in Treasury securities over the next 30 days
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Treasury purchases will begin on December 12
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Policy decision passed with a 9-3 vote
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Schmid and Goolsbee voted to keep rates unchanged
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Miran supported a half-point rate cut
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Four Fed officials forecast two quarter-point rate cuts in 2026
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Reduction of securities holdings ended on December 1
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