FOMC Meeting: What You Need to Know

The Federal Open Market Committee, also known as the FOMC, is the twelve-member committee within the United States Federal Reserve responsible for determining monetary policy. Accordingly, their decision-making process is highly anticipated by market participants and consumers alike.

On Wednesday, 17 September 2025, the Federal Reserve announced its sixth monetary policy decision of the year, cutting rates by 0.25 percentage point, setting the new federal funds target range at 4.00% to 4.25%. This marked the Fed’s first rate cut in 2025, and unsurprisingly, the markets shifted in response. Following the decision Fed Chair Jerome Powell delivered his remarks.

Let’s take a closer look at what the Federal Open Market Committee (FOMC) is, why its decisions are significant, and how this one affected the markets:

TL;DR

• The Federal Open Market Committee (FOMC) sets U.S. monetary policy and meets eight times per year to determine interest rates.

• Monetary policy influences the cost and availability of money in the economy, primarily through open market operations (buying or selling government securities).

• On 10 December 2025, the Fed cut rates by 0.25%, marking its third cut of the year, as it navigates slowing economic conditions, elevated but moderating inflation, and policy uncertainty heading into 2026.

What Is Monetary Policy?

Monetary policy denotes the moves taken by a nation’s central bank, in this case, the Federal Reserve, to ‘move the needle’ with regard to the availability and cost of cash and credit. There are three main levers the Federal Reserve of the United States utilises to enact monetary policy: the discount rate, bank reserve requirements, and open market operations (OMO); the Federal Open Market Committee is responsible solely for the latter.

What Are Open Market Operations and How Are They Used?

Open Market Operations are the sale and purchase of government-backed Treasuries and securities on the market. The federal funds rate, which is set by the Fed’s Board of Governors, is the rate of interest for overnight loans that American banks charge each other; this rate also serves as a benchmark for mortgage rates, interest on credit cards, and more. 

The interest rate banks charge each other is crucial because interbank loans enable banks to keep their cash reserves high enough to satisfy consumer demand for loans. The FOMC uses Open Market Operations as its main tool to ‘push’ the market to that target federal funds rate. When Treasuries and other securities are purchased, using freshly-printed money, the money supply on the market increases, and the interest rate banks charge each other for overnight loans goes down. The money supply falls, and interest rates rise when the FOMC makes the decision that the Federal Reserve should sell Treasuries and securities that it is currently holding. 

The monetary track embarked on by the Federal Reserve is vital because Treasuries are bought and sold by the Fed in such large quantities that they directly influence the overall interest rates available to banks and everyday consumers alike. When more securities are purchased, the supply of money available in US  bank reserves rises, so loans become easier to obtain, and interest rates decrease.

How Does the FOMC Decide What Road to Take?

Depending on the overall economic climate and the FOMC members’ assessment thereof, the FOMC determines whether the Federal Reserve will either buy or sell government-backed securities. 

In times of economic strife, the FOMC tends to recommend buying securities in order to support economic growth; the inverse is true when the national economy seems to be on more stable ground. However, given that economic judgments are not always objective, there can sometimes be disagreements within the FOMC. 

Many factors go into the FOMC’s ultimate determination; members review overall economic indicators such as inflation, unemployment, and GDP. In addition, they may even consider how a change in monetary policy could affect specific industries within the American marketplace.

The FOMC Meeting minutes, which provide a detailed summary of the discussion conducted between committee members, reveal exactly which factors lead to the Fed’s monetary policy decisions, as well as the various members’ views. While a press conference is conducted shortly after the FOMC meeting ends, the minutes are not released for a full three weeks following the meeting’s conclusion, so much of what goes into the committee’s decision remains a mystery to the public for nearly a month afterwards.

FOMC members can often be referred to as ‘hawkish’, those favouring less bond-buying, ‘dovish’, who take the opposite view, or ‘centrists’, whose approach lies somewhere in between. The relative proportion of those holding each view has important repercussions for how the Federal Open Market Committee functions.

How Does the FOMC Operate?

Eight times a year, or more depending on necessity, the committee holds a meeting to decide on the course of federal monetary policy in the near term. 

At the meeting, held in Washington, D.C., committee members will review the nation’s macroeconomic conditions, assess risks, and determine the direction best suited to the FOMC’s goals of keeping prices stable along with an overall sustainable rate of economic growth. 

The twelve members then vote on whether buying or selling securities is more likely to attain these goals. 

The committee's final meeting of 2025 began on Tuesday, 9 December, and concluded on Wednesday, 10 December. It was followed by a press conference and a speech by Fed Chairman Jerome Powell.

Who Sits on the FOMC Committee?

Of the twelve members of the FOMC, seven are Federal Reserve Board of Governors members. The Board of Governors’ chair serves as the FOMC’s chair concurrently. The members of the Board of Governors are appointed by the U.S. President and serve for fourteen years on the board. 

The Federal Reserve Bank of New York’s president, since 2018, John C. Williams, is a perpetual member of the committee. Four of the remaining eleven regional Federal Reserve Bank presidents also serve on the FOMC in one-year rotations to ensure representation from all regions of the United States.

How Does the Fed Influence the U.S. Economy?

When the Federal Reserve moves to increase interest rates, it can have an outsize effect on the economy as a whole. If the FOMC moves to sell securities, thus increasing the federal funds rate and interest rates across the economy, various firms’ assessment of their future revenue flows can be negatively affected, as debt expenses will grow. 

If investors believe that debt servicing could have a negative effect on a company’s revenue growth, they’ll be less inclined to buy that company’s stock, the price of which will fall. The financial sector, conversely, stands to gain from an interest rate rise, since it’ll then be able to gain more from lending fees.

In addition, it may be worth noting that the Fed’s decision can have a notable impact on stocks, in general, and on tech stocks in particular. This is because tech stocks, which are usually considered growth stocks, tend to be susceptible to higher rates since they are “long-duration” assets. 

In addition, during times of inflation and high interest rates, many investors and traders shy away from tech stocks as they opt for safe-haven assets instead. (Source: Yahoo Finance)

FOMC Meeting December 2025 Takeaways: What Did Powell Reveal in His Speech?

Given his status as the Federal Reserve’s chairman, Jerome Powell’s speeches are highly esteemed and can even shift the markets. 

Powell delivered a cautious but measured message during his press conference following the FOMC meeting. While the Committee voted to cut interest rates by 25 basis points, Powell made clear that the path ahead remains uncertain and highly dependent on incoming economic data.

Policy Stance: “Not on a Pre-Set Course”

Powell emphasised that monetary policy is now “well-positioned” to respond to economic developments. He reiterated that the Fed does not see itself locked into a cycle of continued rate cuts. Instead, future policy moves will be made meeting by meeting, based on the evolution of inflation, employment, and broader financial conditions.

Future Cuts Not Guaranteed

Addressing speculation about additional easing, Powell explicitly declined to commit to further rate reductions. The Committee, he said, is comfortable pausing if needed to better understand the direction of the economy heading into 2026.

Inflation Still Above Target: Tariffs to Blame

Powell acknowledged that inflation continues to run above the Fed’s 2% target, but attributed much of the recent rise to tariffs, describing them as a “one-time effect” rather than a sign of persistent inflationary momentum.

Mixed Economic Signals

While consumer spending and business investment remain solid, Powell noted increasing signs of labour-market cooling. Adding to the uncertainty, the recent U.S. government shutdown has complicated data interpretation, prompting the Fed to move cautiously in evaluating the true state of economic activity.

Internal Division Within the Fed

Powell also confirmed that the decision to cut rates was not unanimous, some policymakers preferred no change, while others argued for a deeper cut. This underscores the Fed’s delicate balancing act between supporting growth and maintaining credibility on inflation.

Fed Meeting December 2025: What Does It Mean for the Economy?

The Fed’s December 2025 rate cut and Powell’s cautious remarks signal an economy that is slowing but not stalling, with cooling labour conditions and tariff-driven inflation easing pressure on the central bank. 

By stressing that policy is not on a preset course, Powell may have highlighted uncertainty ahead, meaning borrowing costs may decline only gradually while markets remain highly sensitive to incoming data. 

Overall, the message points to a careful balancing act as the Fed aims to support growth without risking a resurgence in inflation heading into 2026. Still, only time will tell what lies ahead.

How Did the Markets React to the Fed’s Rate Cuts?

• Stocks rallied broadly after the 25 bp rate cut, with the Dow Jones rising nearly 1% and the S&P 500 gaining about 0.7%, pushing major indices toward multi-month highs. 

• Treasury yields declined, particularly on the 2-year and 10-year notes, as investors priced in the prospect of easier policy into 2026, while a weaker U.S. dollar helped lift risk assets and commodities. 

• Rate-sensitive sectors such as homebuilders outperformed, benefiting from lower yields and slightly improved mortgage financing conditions.

• Still, not all market moves were Fed-driven, some tech names fell on earnings-related pressures. 

• Overall, sentiment strengthened as investors positioned for a potential year-end volatility supported by more accommodative financial conditions.

Conclusion

The December 2025 FOMC rate cut underscores a complicated economic landscape: one where growth is cooling, labour markets show signs of softening, and tariff-driven inflation continues to cloud the data outlook. 

Chair Jerome Powell’s message, firmly emphasising flexibility and a data-dependent approach, may signal that policymakers are cautious about further easing without clearer evidence of economic direction. 

While markets reacted positively to the latest cut, the path ahead remains anything but certain. As the U.S. economy enters 2026, the Fed faces the delicate task of supporting growth while avoiding renewed inflationary pressures, and investors should expect policy decisions to remain tightly linked to incoming economic data.

*Past performance does not reflect future resutls. The above are only projections and should not be taken as investment advice.