On Wednesday, December 10, 2025 FOMC Chair Jerome Powell gave his scheduled December 2025 FOMC Press Conference. (link of video and related materials)

Below are Jerome Powell’s comments I found most notable – although I don’t necessarily agree with them – in the order they appear in the transcript. These comments are excerpted from the “Transcript of Chair Powell’s Press Conference“ (preliminary)(pdf) of December 10, 2025, with the accompanying “FOMC Statement” and “Summary of Economic Projections” (pdf) dated December 10, 2025.

Excerpts from Chair Powell’s opening comments:

In the near term, risks to inflation are tilted to the upside and risks to employment to the downside—a challenging situation. There is no risk-free path for policy as we navigate this tension between our employment and inflation goals. A reasonable base case is that the effects of tariffs on inflation will be relatively short-lived—effectively a one-time shift in the price level. Our obligation is to make sure that a one-time increase in the price level does not become an ongoing inflation problem. But 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. Accordingly, we judged it appropriate at this meeting to lower our policy rate by 1/4 percentage point.

With today’s decision, we have lowered our policy rate 3/4 percentage point over our last three meetings. This further normalization of our policy stance should help stabilize the labor market while allowing inflation to resume its downward trend toward 2 percent once the effects of tariffs have passed through. The adjustments to our policy stance since September bring it within a range of plausible estimates of neutral and leave us well positioned to determine the extent and timing of additional adjustments to our policy rate based on the incoming data, the evolving outlook, and the balance of risks. In our Summary of Economic Projections, FOMC participants wrote down their individual assessments of an appropriate path of the federal funds rate, under what each participant judges to be the most likely scenario for the economy. The median participant projects that the appropriate level of the federal funds rate will be 3.4 percent at the end of 2026 and 3.1 percent at the end of 2027, unchanged from September. As is always the case, these individual forecasts are subject to uncertainty, and they are not a Committee plan or decision. Monetary policy is not on a preset course, and we will make our decisions on a meeting-by-meeting basis.

Let me now turn to issues related to the implementation of monetary policy, with the reminder that these issues are separate from—and have no implications for—the stance of monetary policy. In light of the continued tightening in money market interest rates relative to our administered rates, and other indicators of reserve market conditions, the Committee judged that reserve balances have declined to ample levels. Accordingly, at today’s meeting, the Committee decided to initiate purchases of shorter-term Treasury securities (mainly Treasury bills) for the sole purpose of maintaining an ample supply of reserves over time. Such increases in our securities holdings ensure that the federal funds rate remains within its target range, and are necessary because the growth of the economy leads to rising demand over time for our liabilities, including currency and reserves. As detailed in a statement released today by the Federal Reserve Bank of New York, reserve management purchases will amount to $40 billion in the first month and may remain elevated for a few months to alleviate expected near-term pressures in money markets. Thereafter, we expect the size of reserve management purchases to decline, though the actual pace will depend on market conditions.

Excerpts of Jerome Powell’s responses as indicated to various questions:

NICK TIMIRAOS. Nick Timiraos of The Wall Street Journal. Chair Powell, there’s been some discussion recently of the 1990s. In the 1990s, the Committee did two discrete sequences of three quarter-point cuts, one in 1995-’96 and one in 1998. And, after both of those, the next move in rates was up, not down. With policy now closer to neutral, is it a foregone conclusion that the next move in rates is down? Or should we think of policy risks as genuinely two-sided from here?

CHAIR POWELL. So I don’t think that a rate hike is anybody’s base as the next thing — is anybody’s base case at this point. And I’m not hearing that. What you see is some people feel we should stop here and that we’re at the right place and just wait. Some people feel like we should cut once or more this year and next year. But the — but, when people are writing down their estimates of policy of where it should go, it is either holding here or cutting a little or cutting them more than a little. So I don’t see that as — I don’t see the base case as involving that. So — and, of course, you know, a dataset of two, now three, is not a big dataset. But you are right about those two three-cut times in the ’90s.

NICK TIMIRAOS. If I could follow up. The unemployment rate has been rising very gradually for the better part of two years. And, indeed, the statement today no longer describes the unemployment rate as remaining low. What gives you confidence it won’t continue rising in 2026, especially when housing and other rate-sensitive sectors still appear to be feeling restrictive policy from the — notwithstanding the 150 basis points in cuts prior to today?

CHAIR POWELL. So, yeah, the — I think the idea is that with now having cut so many of our five basis points more now and having policy, you know, I’d call it in a broad range of plausible estimates of neutral, that that will be a place where — which will enable the labor market to stabilize or to only kick up one or two more tenths. But we won’t see, you know, any kind of a sharper downturn, which we haven’t seen any evidence of it all. At the same time, policy is still in a place where it’s not accommodative and we feel like — we feel like we have made progress this year in non-tariff-related inflation. And as tariffs come through, as they flow through, that’ll show through next year. But, as I said, we’re well past — well placed to wait and see how that turns out. That is our expectation, but, you know, we’re going to start to see the data and it’ll tell us whether we were right or not.

CLAIRE JONES. Claire Jones, Financial Times. A lot of people interpreted your comments at the October meeting that, you know, when there’s a foggy situation, we slow down to mean that, you know, there won’t be a cut now, there’ll be a cut in January instead. So it’d be good to get a sense of why did the Committee decide to move today rather than to move in January instead. Thank you.

CHAIR POWELL. Right. So, in October, I said that there was no certainty of moving. And that was indeed correct. I said it’s possible you could think about it that way, but I was careful to say other people could look at it differently. So why did we move today? You know, I would say — point to a couple things. First of all, gradual cooling in the labor market has continued. Unemployment is now up 3/10 from June through September. Payroll jobs averaging 40,000 per month since April. We think there’s an overstatement in these numbers by about 60,000. So that would be negative 20,000 per month. And, also, just to point out one other thing, surveys of households and businesses both showed declining supply and demand for workers, so I think you can say that the labor market has continued to cool gradually, maybe just a touch more gradually than we thought. You know, in terms of inflation, we are — it’s come in a touch lower. And I think the evidence is kind of growing that what’s happening here is services inflation coming down and that’s offset by increases in goods, and that goods inflation is entirely in sectors where there are tariffs. So that does build on the story. And, so far, it’s only a story that this is — that the goods inflation, which is really the source of the excess at this point, that that — almost more than half the source of the excess inflation is goods — is tariffs. And you’ve got to say then, “So what do we expect from tariffs?” And it’s — I would say that is, to some extent, down to looking for broader economic, you know, heat. You know, do we see a hot economy? Do we see constraints? Do we see what’s going on with wages? You saw the ECI report today. It doesn’t feel like a hot economy that wants to generate, you know, a Phillips curve kind of inflation. So we look at all those things and we say that this was a decision to make. Obviously, it wasn’t unanimous. And — but, overall, that was the judgment that we made and that’s the action we took.

CLAIRE JONES. Just on the ample reserves point, how concerned were people around the table about some of the tensions we’ve seen in money markets? Thank you.

CHAIR POWELL. Well, I wouldn’t say “concern.” So what really happened is this. Balance sheet shrinkage, sometimes called QT, went on. We had a framework in place for monitoring it and nothing happened. The overnight reverse repo facility went down pretty much close to zero. And then, beginning in September, the federal funds rate started to tick up within the range. Right? And it ticked up almost all the way to interest on reserve balances. There’s nothing wrong with that. What that’s telling you is that we’re actually in reserves, in an ample reserves regime. So, you know, we knew this was going to come. When it finally did come, it came a little quicker than expected, but we were, yeah, absolutely there to take the actions that we said we would take. So — and we — those actions are today. So, you know, we announced that we’re resuming reserve management purchases. That is completely separate from monetary policy. It’s just we need to keep an ample supply of reserves out there. Why so big? The answer to that is, you know, if you look ahead, you will see that April 15th is coming up, and our framework is such that we want to have ample reserves even at times when reserves are at a low level temporarily. So that’s what happens on Tax Day. People pay a lot of money to the government, reserves drop sharply and temporarily. So this seasonal build up that we’ll see in the next few months was going to happen anyway. It was going to happen because April 15th is April 15th. There’s also a secular ongoing growth of the balance sheet. We have to keep reserves, call it, constant as a — as it relates to the banking system or to the whole economy. And that alone calls for us to increase about $20-25 billion per month. So that’s a small part. That’s going on. It’s also happening in the context of a temporary few month front loading to get reserves high enough to get through the — you know, the tax period in mid-April. So that’s what’s happening there.

also:

MICHAEL MCKEE. No mulligans for Andrew. Michael McKee from Bloomberg Radio and Television. Ten-year rates have — are 50 basis points higher than when you started cutting back in September of 2024, and the yield curve basically has been steepening. Why do you think that continuing to cut now, especially in the absence of data, is going to bring down the yield on the thing that will move the economy the most?

CHAIR POWELL. So we’re looking at the real economy and focusing on that. And you have — you’ve got — when the long bonds move around, you’ve got to look at why they’re moving around. If you look at inflation compensation, it’s very — that’s one part of it is inflation compensation break-evens. And, you know, they’re at very comfortable levels. They’re at levels consistent — past — once you get out past the very short term now break-evens are at a — you know, at quite — levels that are quite consistent with 2 percent inflation over time. So there’s nothing happening with rates going up out there that suggests concern about inflation in the long term or anything like that. I mean, I look at these things pretty regularly. Same thing with surveys. Surveys are all saying that the public understands our commitment to 2 percent and expects us to get back there. So why are rates going up? It has to be something else. It must be, you know, an expectation of higher growth or something like that. And that’s a lot of what’s been going on. I mean, you saw a big move, you know, toward the end of last year, which was not to do with us, it was to do with other developments.

MICHAEL MCKEE. Well, you just mentioned that we’re — the public is expecting you to get back to 2 percent. And Americans, overwhelmingly, are citing high prices, inflation, as their number one concern. Can you explain to them why you’re prioritizing the labor market, which seems relatively stable to most people instead of their number one concern, inflation?

CHAIR POWELL. So we — as you know, we have a network of contacts in the US economy, which is really unmatched if you go through the 12 reserve banks. So we hear loud and clear how people are experiencing really costs. It’s really high costs. And a lot of that is not the current rate of inflation. A lot of that is just embedded higher cost, due to higher inflation in 2022 and ’23. So that’s what’s going on. And so the best thing we can do is restore inflation to its 2 percent goal. And our policy is intended to do that. But also have a strong economy where real wages are going up and earning money. And they’re — we’re going to need to have some years where real compensation is higher — you know, it’s positive, significantly positive, so wages — nominal wages are higher than inflation for people to start feeling good about affordability — the affordability issue. And — you know, so we’re working hard on that. We want to — we’re trying to keep inflation under control but also support the labor market and strong wages so that people are earning enough money and feeling economically healthy again.

also:

ELIZABETH SCHULZE. Thanks so much. Elizabeth Schulze with ABC News. Just to follow up, you keep talking about job growth being negative. Why do you think job growth is so much worse than all the official data? Why do you think job growth is — to follow up on your comments about job growth, why is it so much worse than the official data is suggesting?

CHAIR POWELL. Oh, well, we just — we know, I think. It’s — this is — I don’t think this is particularly controversial. There’s a — it’s very difficult to estimate job growth in real time. They don’t count everybody. They have a survey. And there’s been something of a systematic overcount. And so we expected and it corrected twice a year. So the last time they corrected it, we thought the correction would be 8 or 9 hundred thousand. I’ll won’t get the numbers exactly right. And that was exactly what happened. So we think that that has persisted. And so there was an overcount in the payroll job numbers, we think, continuing. And it will be corrected. I don’t have the exact month in my head right now. But — and that’s just — I don’t — again, I think forecasters generally understand that. So — and we think it’s about 60 thousand a month. So 40 thousand jobs could be negative 20. And, you know, that could be wrong by 10 or 20 in either direction. But, in any case, — and — but the thing is that’s some — that’s job creation in a way, that’s job — that’s demand. Labor supply has also come down quite sharply. So, you know, if you had a world where they’re just — there’s just no growth in workers and you really don’t need a lot of jobs to have full employment, some people argue that’s what we’re looking at. But I think a world where job creation is negative, I just think we need to watch that situation very carefully and be in a position where we’re not, you know, pushing down on job creation with our policy.

ELIZABETH SCHULZE. When we’re talking about supply, we have seen major American employers like Amazon cite AI in job cuts. How much right now are you factoring in AI into the current weakness in the job market?

CHAIR POWELL. So it’s probably part of the story. It’s not a big part of the story yet. We don’t know whether it will be. But, you know, for example, if you look at — you can’t miss the big announcements of layoffs and also companies saying that they’re not going to hire anybody for a long time, and they cite AI, that’s all clearly happening. At the same time, people are not filing for unemployment insurance. And, since job creation — job finding rates are extremely low, if there were big numbers of layoffs, you’d expect the continuing claims to go up and you’d expect new claims to go up. And really haven’t much. So it’s a little bit curious. But longer-term though, you know, the question is, “What are we going to see here?” And we don’t know. But it’s — you know, there’s a — it may be that, in past technology — really significant technology and innovation eras, you have seen some jobs destroyed and other jobs made. Ultimately, what’s happened for a couple hundred years is, when you get through all that, you have higher productivity, and you have new jobs and there are enough jobs for people. This is a — this may be different. You know, it’s — every time we have a wave of technology, we think, “Oh, this could put a lot of people out of work. What are they going to do?” In the past, there’s always been more work and higher productivity and incomes have risen. What will happen here, we’re going to have to see. But right now is such early days, we don’t think we see much — it’s certainly not showing up in layoffs yet.

also:

CHRISTINE ROMANS. Thank you. Thank you, Chair Powell. Christine Romans, NBC News. I wanted to ask you about how the higher-income households are really driving spending right now. They’re backed by home equity and stock market wealth. But lower-income consumers are really struggling with the accumulation of five years now of rising prices. It’s price levels, not really the inflation rate holding some of these families back. How sustainable is this so-called K-shaped economy? And what are the Fed’s thoughts on whether that’s a risk going forward?

CHAIR POWELL. So we do — through our vast network of contacts and just through our observation of what’s going on in the economy, we hear about this a lot. If you listen to the earnings reports for consumer-facing companies that tend to deal with low- and moderateincome people, they’ll all say that we’re seeing people, you know, tightening their belts, you know, changing products that they buy, buying less and that sort of thing. And so it’s clearly a thing. It’s also clearly a thing that, you know, asset values, housing values and securities values are high, and they tend to be owned by people more at the higher end of the income and wealth. And so, as to how sustainable it is, I don’t know. Most of the consumption does happen by people who have more means. I think, you know, the top third accounts for way more than a third of the consumption, for example. So, it’s a good question how sustainable that is. You know, the best we can do is to have a — you know, price stability and a strong labor market. And what we saw — for example, what we saw at the end of the — you know, the very, very long expansion that ended with the outbreak of the pandemic, we saw that it was 10 years and eight months or something like that, the longest one in recorded history. In the last two years, most of the job — the largest part of the wage gains were going to people in the bottom quartile, the bottom part of the low and moderate income. So, you know, having a strong labor market for a long period of time is really, really good from a social standpoint. It’s helping people at the lower-income levels and that’s what we all want to get back to. But we’ve got to have price stability, and we’ve got to have, you know, full employment, maximum employment.

CHRISTINE ROMANS. And, just quickly, you mentioned the housing market remains kind of weak. With these rate cuts that we’ve seen, is there a chance we’re going to see more affordability in the housing market so more people can maybe enjoy that part of wealth creation? I mean, the average age — the median age of a first-time homebuyer is now 40 years old. That’s the highest on record.

CHAIR POWELL. Yeah, So the housing market faces some really significant challenges. And I don’t know that, you know, a 25-basis point decline in the federal funds rate is going to make much of a difference for people. You know, housing supply is low. Many people have very, very low-rate mortgages from the pandemic period and they kept refinancing and caught the really low. So it’s made it expensive for them to move. And, you know, we’re a ways away from that changing. Also, we’re just — we haven’t built enough housing in the country for a long time. And so a lot of estimates suggest that we just need more housing of different kinds. So housing is going to be a — you know, a problem. And, you know, really the tools to address it are — we can raise and lower interest rates, but we don’t really have the tools to address, you know, a secular housing shortage — a structural housing shortage.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 6894.15 as this post is written

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