US Fed makes third straight rate cut  

Justin Setser would be ‘pretty surprised’ if another cut is made in the first half of 2026. 

For the third time in as many meetings, the Federal Reserve voted on Dec. 10 to make a rate cut. 

Such as its prior meeting in late October, the decision was not unanimous, as the central bank’s Federal Open Market Committee voted 9-3 to lower its benchmark interest rate by a quarter percentage point. The cut resulted in a range between 3.5% and 3.75%. 

For the third straight FOMC meeting, Fed governor Stephen Miran pushed to cut rates by a half percentage point. Kansas City Fed President Jeffrey Schmid voted to hold rates steady for a second consecutive meeting. He was joined this time by Chicago Fed President Austan Goolsbee. 

Chairman Jerome Powell said at a Dec. 10 news conference that conditions in the labor market appear to be gradually cooling, and inflation remains somewhat elevated. The current annual inflation rate is at 3% ahead of a Dec. 18 update from the U.S. Department of Labor. The Fed’s dual mandate seeks to achieve maximum employment and inflation at a rate of 2%.  

“There is no risk-free path for policy as we navigate this tension between our employment and inflation goals,” Powell said. “With downside risks to employment having risen in recent months, the balance of risks has shifted. Our framework calls for us to take a balanced approach in promoting both sides of our dual mandate.” 

Justin Setser, senior vice president and regional chief investment officer with Central Trust Co., said the U.S. unemployment rate has ticked up for three straight months, with September coming in at 4.4%. Missouri’s seasonally adjusted unemployment rate was unchanged in September at 4.1% compared to August, according to the Missouri Economic Research and Information Center.  

“They appear to be more concerned about the unemployment side of that dual mandate than inflation,” Setser said of the Fed.  

Setser said the Fed appears to believe tariffs are a reason inflation is at 3% and see them as a likely one-time bump. Powell said projections are for inflation to ease in 2026, dipping to about 2.5%. 

Ahead of the Dec. 10 meeting, economic data has been delayed due to the federal government shutdown that included all of October and nearly half of November. Aside from a federal inflation report coming soon, the U.S. Bureau of Labor Statistics will release its November jobs data on Dec. 16.  

“There is a lot of new data coming over the next week or two that will be available for their next meeting and certainly more helpful,” Setser said, noting the lack of fresh data for the Fed at this meeting likely had “a small impact” on its decision.  

In its statement, the FOMC said in regard to considering the extent and timing of additional adjustments to the federal funds rate, “the committee will carefully assess incoming data, the evolving outlook and the balance of risks.” 

Setser said he sees that as a measure of restraint, adding it’s “highly unlikely” the Fed will make an additional cut at its next meeting, scheduled in January.  

“I would say the bar for another rate cut early next year is pretty high. Their projections are pricing in one rate cut – just a quarter point next year and a quarter point in 2027,” he said. “It kind of feels like they feel like they’re pretty close to where they need to be and they’re going to give themselves kind of a long runway here to see how the data and the economy shakes out over the next three to six to nine months probably.” 

Setser said he’d be “pretty surprised” if a cut happens anytime in the first half of the year unless unemployment spikes.  

“If unemployment continues to go up, they will certainly lower rates,” he said. “But if unemployment stays moderately low or where it is and inflation doesn’t get out of hand, I think they’re going to take some time off here.”