Divided Fed Lowers Rates, Signals Pause And One 2026 Cut As Growth Rebounds

Central Bank

Summary:

Fed reduces policy rate by quarter of a percentage point.Three policymakers dissent on policy decision.Policymakers see one rate cut in 2026.

The U.S. Federal Reserve cut interest rates on Wednesday in another divided vote, but signaled it will likely pause further reductions in borrowing costs as officials look for clearer signals about the direction of the job market and inflation that "remains somewhat elevated."

New projections issued after the U.S. central bank's two-day meeting showed the median policymaker sees just one quarter-percentage-point cut in 2026, the same outlook as in September, with inflation expected to slow to around 2.4% by the end of next year even as economic growth accelerates to an above-trend 2.3% and the unemployment rate remains at a moderate 4.4%.

"In considering the extent and timing of additional adjustments to the target range for the federal funds rates, the Committee will carefully assess incoming data," the rate-setting Federal Open Market Committee said in language that in the past has been used to signal a pause in policy actions - an outlook at odds with market expectations of two rate cuts next year.

The decision to lower the benchmark policy rate by a quarter of a percentage point to the 3.50%-3.75% range drew three dissents, with Chicago Fed President Austan Goolsbee joining Kansas City Fed President Jeffrey Schmid in arguing the policy rate should be left unchanged, and Fed Governor Stephen Miran again advocating a larger half-percentage-point reduction.

How monetary policy evolves from here, heading into a midterm U.S. election year that could revolve around the performance of the economy and with President Donald Trump urging sharper reductions, will now hinge on data that is still lagging from the impact of the 43-day federal government shutdown in October and November.

SOLID 2026 ECONOMIC OUTLOOK

The projections are in a sense optimistic: Interest rates may remain higher than anticipated, but the economy is seen growing faster even as inflation falls and the jobless rate also eases lower.

Renovations continue at the Federal Reserve Board building in Washington, D.C., U.S., November 14, 2025. REUTERS/Elizabeth Frantz/File Photo

But the latest policy statement and projections were crafted without the benefit of recent job and inflation reports, and instead relied on "available indicators," which Fed officials have said include their own internal surveys, community contacts and private data.

The most recent official data on unemployment and inflation is for September, and showed the unemployment rate rising to 4.4% from 4.3%, while the Fed's preferred measure of inflation also increased slightly to 2.8% from 2.7%. The Fed has a 2% inflation target, but the pace of price increases has risen steadily from 2.3% in April, a fact at least partly attributable to the pass-through of rising import taxes to consumers and a driving force behind the central bank's policy divide.

Job and inflation data for November will be released next week, followed later by a detailed report of economic growth for the third quarter.

"Available indicators suggest that economic activity has been expanding at a moderate pace," the Fed's statement said. "Job gains have slowed this year, and the unemployment rate has edged up through September," it said, dropping a reference to the jobless rate as "low."

The projections showed a core of six policymakers preferring no rate cut this year, and seven anticipating no further cuts in 2026.

The median projection is for one additional quarter-percentage-point cut in 2027 as well as inflation continues to subside towards the central bank's 2% target.

Source: Reuters

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Manuel

Forex

Central Bank

The Federal Reserve cut interest rates by a quarter percentage point on Wednesday for the third time this year, while projecting one more cut for next next year.

The central bank voted in a split decision to trim its benchmark interest rate to a range of 3.5% to 3.75%.

The decision drew dissents on both sides. Kansas City Fed president Jeff Schmid and Chicago Fed president Austan Goolsbee disagreed with the decision, preferring to hold rates steady.

On the other side, Fed governor Stephen Miran pushed to cut rates by a half a percentage point.

Fed officials still see one more rate cut next year, the same number projected in September, as the job market has softened but inflation remains roughly a full percentage point above the central bank’s 2% goal.

“In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks,” officials said in their policy statement.

“Extent and timing” – words used earlier this year — were added back into their statement, reflecting the restraint officials will bring to future rate cut decisions.

Six members of the Fed would have preferred not to cut rates Wednesday. Looking ahead to next year, seven believe no cuts are needed in 2026 with three who think the central bank is now below the level needed on their benchmark policy rate. Four see one cut, four see two cuts, two see three cuts, one sees four cuts and one sees six cuts.

Officials revised their outlook for economic growth higher next year with inflation expected to drop and the unemployment rate inching down.

Next year, inflation is seen falling to 2.5%, compared with 2.6% previously, and a level of 3% to end 2025. GDP is seen rising 2.3% next year verses 1.8% previously, while GDP for this year was revised up a tenth of a percent to 1.7%. The unemployment rate is seen ticking down to 4.4% next year from 4.5% this year, the same as seen previously. The unemployment rate currently stands at 4.4%.

Officials will also resume purchases of short-term Treasuries as needed to maintain ample reserves for the banking sector and hold the balance sheet level.

Ahead of Wednesday’s meeting, economic data has been delayed due to the government shutdown that lasted all of October and into November. The latest reading of the Fed’s preferred inflation gauge, the Personal Consumption Expenditures index, was released with a two-month lag. For September, on a “core” basis excluding food and energy prices, inflation increased 2.8% in September, down a tenth of a percentage point from August.

A stronger-than-expected — albeit stale — September jobs report showed payroll growth bounced back that month with 119,000 jobs added, compared with a loss of 4,000 for August. That contributed to a volatile trend where job creation turned negative in June, increased in July, decreased again in August, and rebounded again in September.

Fed officials will receive more real-time data starting next week with the November jobs report on Tuesday and readings on inflation later in the week.

Source: Yahoo Finance

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Manuel

Political

Commodity

Chinese rare-earth magnet suppliers to U.S. automaker Ford Motor were included in the first batch of new export licences issued by Beijing to boost shipments and reduce shortages of ‌the vital components, the carmaker said on Wednesday.

The so-called general licences were agreed after Presidents Xi Jinping ‌and Donald Trump met in South Korea and will reportedly allow larger shipments with fewer hurdles under year-long permits for individual customers.

China’s introduction of rare-earth export controls in April forced companies to apply for licences for every shipment, creating shortages that brought parts of ⁠the auto supply chain to ‌a halt and handed Beijing enormous leverage in trade talks with Washington.

Reuters reported last week that three Chinese magnet suppliers had licences ‍issued, but Ford appears to be the first foreign customer to acknowledge that suppliers have received approvals under the streamlined system.

China has said little publicly about the new licences, how they will work or who will receive them, raising fears among non-U.S. diplomats and ‌producers that the licences will be for U.S. customers primarily.

Those concerns were heightened this week when Germany's Foreign Minister Johann Wadephul said that the country's automakers were not included in this first round. Many of those manufacturers, such as Volkswagen, have had ties with China for many years.

Wadephul said that "quite a lot of work" was still ⁠needed to persuade Beijing to grant the new licences to German companies.

While the system agreed between Xi and Trump should accelerate exports for some customers, it remains to be seen how widely Beijing will issue licences and whether customers ‍in more sensitive sectors ⁠such as aerospace or semiconductors will qualify. China's rare-earth exports jumped in November.

"While we are pleased that some of our suppliers have secured these approvals, we ⁠urge the U.S. and Chinese governments to continue their collaboration to fully resolve supply chain issues," ‌Ford said in its statement to Reuters.

Source: Reuters

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Thomas

Central Bank

The Federal Reserve is widely expected to announce a quarter percentage point, or 25 basis point, cut to its overnight lending rate when the policymakers issue their decision at 2 p.m. ET on Wednesday. That reduction would bring the benchmark rate to a targeted range of between 3.50% to 3.75%.

While traders feel fairly certain of that outcome, there are other key items to watch that are far less predictable, including what might be ahead for next year. The rate-setting FOMC is split between members who favor cuts to head off further weakness in the labor market and those who think easing has gone far enough and threatens to aggravate inflation.

On top of that, inflation worries persist.

"Inflation is not back to 2% so they're going to need to keep policy somewhat restrictive if they are going to put downward pressure on inflation," former Cleveland Fed President Loretta Mester said Tuesday on CNBC. "Right now, inflation is pretty well above the goal, and it's not just all tariff-driven."

Traders will be scanning the Fed's statement and watching Fed Chair Jerome Powell's press conference at 2:30 p.m. for hints about the next steps.

Source: CNBC

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Justin

Economic

China's latest inflation data sent mixed signals through global markets. Consumer prices rose 0.7% year-on-year, the fastest pace in nearly two years. Yet producer prices fell 2.2%, extending a deflation trend that has lasted four years. This split shows how uneven China's recovery remains. Moreover, higher food costs lifted headline inflation, while weak demand still pushed factory prices lower. As a result, markets worry that China's domestic demand remains fragile. Analysts note that oversupply in sectors such as coal and energy continues to weigh on prices. And although Beijing supports consumption through targeted stimulus, it avoids broad measures. Therefore, China's growth path still looks uncertain. Investors now wait for the Central Economic Work Conference to see whether policymakers shift toward stronger support in 2026.

China's Weak Demand and Its Ripple Effect on Global Markets

Markets reacted quickly to China's inflation data. The Hang Seng and CSI 300 both fell as investors reassessed the country's economic momentum. Japan's Nikkei and South Korea's Kospi also slipped, highlighting how sensitive Asia-Pacific markets are to China's signals. Lower factory-gate prices show that manufacturers still struggle with excess supply. This weakness limits China's ability to drive regional growth. And while exports remain strong, domestic spending lags behind. That imbalance pressures companies across Asia. At the same time, global traders are watching the FED. With a widely expected rate cut of 0.25%, investors hope for a softer U.S. dollar, which could lift emerging markets. Still, uncertainty remains high as inflation and growth trends diverge across regions.

China's AI Talent Surge is Redefining Global Competition

The race for AI talent is heating up, and China is gaining ground fast. The country produced 3.57 million STEM graduates in 2020—more than four times the U.S. total. This surge is reshaping how tech companies recruit and innovate. Chinese firms are also securing more U.S. patents, with Huawei ranking among the top global players. Universities and industry are working closer together to push AI development and reduce reliance on foreign technology. As a result, China is developing competitive AI models at a fraction of the cost of U.S. systems. This shift signals a major change in tech leadership. Talent and data scale give China an edge even as the U.S. maintains a lead in high-end chips. Yet both markets depend on stable geopolitical conditions, and rising tensions will shape the next phase of AI innovation.

Why AI, Energy, and Talent Matter for Markets and the FED

The global AI race also affects financial markets and monetary policy. Companies require massive computing and electrical power to train advanced models. Analysts warn that the U.S. could face energy shortages before it runs out of GPUs. Meanwhile, China appears better positioned on the power front, giving it another strategic advantage. These shifts matter because AI drives productivity, investment flows, and corporate earnings. Markets respond to every new breakthrough. Furthermore, the FED follows these trends closely as they influence long-term inflation and growth. As AI spreads across industries, it could lift productivity but also disrupt jobs. Policymakers must balance innovation with economic stability. Therefore, the FED's decisions on rates and future guidance will shape how quickly AI investments accelerate.

What Investors Should Watch Next

Investors now stand at a crossroads. China's inflation shows early signs of stabilization, but deflation risks remain. Its AI momentum is strong, yet global competition is fierce. Markets are waiting for the FED to deliver clarity on its rate path. A softer stance could lift risk assets worldwide. However, persistent inflation in the U.S. may limit how far the FED can go. Meanwhile, Asia-Pacific markets remain highly sensitive to China's economic signals. As a result, traders must track both macro data and technology developments. The combination of China's domestic challenges, the AI talent race, and the FED's policy moves will set the tone for markets in 2025.

Source: CryptoSlate

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Adam

Economic

Chinese rare earth producer Ningbo Jintian Copper (601609.SS) said on Wednesday it had secured streamlined licences for ‌magnet product exports.

The new "general licences" are designed to allow more ‌exports under year-long permits for individual customers following an agreement after a meeting between China's President Xi Jinping and his U.S. counterpart Donald ⁠Trump in late ‌October.

Ningbo Jintian Copper's rare earth magnet products are used in electric vehicles, ‍wind turbines, robots, consumer electronics and medical equipment, it said on an investor interactive platform.

Reuters reported last week that at least three Chinese rare earth ‌magnet makers including JL Mag Rare Earth, Ningbo Yunsheng and Beijing Zhongke San Huan High-Tech had secured the licences enabling them to accelerate exports to some customers.

Beijing added several rare earth ⁠elements and magnets to its export control list in early April, requiring a dual-use licence for exports. China's exports of rare earth ‍magnets slumped ⁠in April and May, forcing some global automakers to shutter parts of production.

The new ⁠streamlined licence will not replace the existing dual-use licensing ‌regime.

Source: Reuters

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Adam

Commodity

On Tuesday, US natural gas price extended losses from the previous session in reaction to forecasts of warmer weather in most parts of the country. Near-record output and ample inventories have further fueled the pullback, even as the bulls remain in control. Meanwhile, European prices are under selling pressure as investors weigh the prospects of a peace deal and subsequent easing of Russian sanctions.

Europe Vs US natural gas prices: The paradox that lies within

This time of the year is usually marked by higher natural gas prices as investors price in increased warming demand during the Northern Hemisphere’s winter season. In fact, weather forecast is one of the bullish factors that bolstered US natural gas prices to a three-year high late last week. Besides, record LNG exports to Europe have fueled the months-long rally.

While the short-term outlook remains positive, investors appear to weigh on whether the recent surge is the onset of a larger bullish trend or just a weather-driven spike that will soon fade. Indeed, this dilemma, coupled with the expected profit-booking, explains the pullback recorded since the start of the week.

According to the updated weather forecast, most parts of the US are expected to experience warmer temperatures in the near term. Atmospheric G2 has indicated that the eastern and southern US will be colder for the period between 18th and 22nd December, while other regions remain warmer.

In its latest weekly report, EIA highlighted a draw of 12 Bcf compared to the expected 15 Bcf. Subsequently, the surplus surged from 160 Bcf to 191 Bcf. In addition to the ample amount of natural gas in storage, the near-record output is weighing on the prices.

Nonetheless, steady LNG exports continue to offer support to US natural gas prices while exerting selling pressure in the European market. In the current month, the natural gas flows to the eight major LNG export plants within the US are averaging at 18.9 Bcf/per day compared to the monthly record high hit in November at 18.2 Bcf/per day.

Meanwhile, prospects of a peace deal that could see the return of Russian gas have pushed the benchmark for European prices, Dutch TTF, to the lowest level since April 2024.

US natural gas price technical analysis

Late last week, the Henry Hub natural gas futures rallied to a three-year high at $5.50 per MMBtu as it marked seven consecutive weeks of gains. Since late September, it has recorded higher highs and higher lows as a positive demand outlook fuels the bullish sentiment.

On Tuesday, it extended losses from the previous session, having pulled back below the psychologically crucial zone of $5.00. At the time of writing, the US natural gas was trading at $4.81.

Despite the pullback, the bulls are still in control as the asset continues to trade above the 25 and 50-day EMAs. Indeed, the decline can be perceived as a cool-off rather than trend reversal.

In the immediate term, the range between Monday’s intraday high of $5.20 and the resistance-turn-support zone of $4.70 will be worth watching. Below that zone, the bulls will be keen on defending the crucial support at $4.50 as they gather enough momentum for a rebound. On the flip side, a bounceback past the range’s upper limit will give buyers a chance to retest the 3-year high at $5.50.