10 December 2025
If you are covering the interest rate cut by the Federal Reserve, please find below a comment from Lindsay James, investment strategist at Quilter:
“Following all the speculation and expectation, the Federal Reserve has once again cut rates. The recent period of murky, and often missing, data made the job of the Committee incredibly challenging, leaving private data such as the ADP payroll figures carrying much more weight. This data was not kind in November, with it showing 32,000 private sector jobs were cut in that month, and despite a positive jobs report in from September when it was belatedly released last month, it came marred by downward revisions for August and an overall uptick in unemployment to 4.4%. However, there is plenty of evidence to suggest that immigration policy – not Fed policy – is a far greater driver of the apparent slowdown in the jobs market, and so imply that a rate cut – or indeed several – will have limited effect in this area of the economy.
“With US CPI having risen from 2.3% in April to 3% in September and pressures building in 2026 as fiscal stimulus begins to kick in, voting members are increasingly sounding more hawkish. Donald Trump clearly wants to run the economy hot in the lead up to the mid-terms with earlier expectations for deeper rate cuts in 2026 having been tempered in recent weeks. Some of this shift in tone could be a deliberate counter to the dovish tones coming from Fed Chair candidates; the current ‘favourite’ Kevin Hassett has said there is ‘plenty of room’ to cut rates. But if successful, he may find that building consensus involves bridging the gap with other voting members who have become deliberately more hawkish in order to minimise the extent of cuts ahead of time.
“With a flood of data due after the Fed decision, a hold at this meeting would have been understandable. A move to cut suggests not only that the committee are genuinely concerned by the labour market but also potentially about the wider health of the US economy, with a slowdown in specific sectors such as construction, casual dining and freight risking spillover effects elsewhere. With such high expectations for strong earnings growth as we move towards 2026, investors should continue to beware that the US economy is not in fact firing on all cylinders, underlining the need to tread carefully.”
