The Fed decision is expected to feature a rate cut and a lot more. Here's what to expect

Economic

Summary:

The Fed is expected to deliver a “hawkish cut,” lowering rates while signaling caution about future easing. A divided committee, mixed labor and inflation data, and updated projections will shape Powell’s message.

The Federal Reserve is poised to deliver its third straight interest rate cut Wednesday, while simultaneously firing a warning shot about what's ahead.

Following a period of remarkable indecision about which way central bank policymakers would lean, markets have settled on a quarter percentage point reduction. If that's the case, it will take the Fed's key interest rate down to a range of 3.5%-3.75%.

However, there are complications.

The rate-setting Federal Open Market Committee is split between members who favor cuts as a way to head off further weakness in the labor market against those who think easing has gone far enough and threatens to aggravate inflation.

That's why the term "hawkish cut" has become the buzzy term for this meeting. In market parlance, it refers to a Fed that will reduce, but deliver a message that no one should be holding their breath for the next one.

"The likeliest outcome is a kind of hawkish cut where they cut, but the statement and the press conference suggesting that they may be done cutting for now," said Bill English, the Fed's former director of monetary affairs and now a Yale professor.

English expects the message to be "that they've made an adjustment and they're comfortable where they are, and they don't see a need to do anything more in the near term, as long as things play out more or less as they expect."

Where the full committee falls will be expressed in the post-meeting statement and Chair Jerome Powell's news conference. Wall Street economic commentary anticipates a tweak in the statement to harken back to a year ago with language regarding "the extent and timing of additional adjustments" that Goldman Sachs expects to reflect "the bar for any further cuts will be somewhat higher."

In addition to the rate decision and the statement, investors will be watching an update to the "dot plot" of individual officials' rate expectations; expectations for gross domestic product, unemployment and inflation, and a possible update of the Fed's asset purchase intentions, with some expecting the committee to pivot from ceasing the runoff of maturing bond proceeds back to purchases.

Many moving parts

As for Powell, his tone "will also likely get across that the bar has risen in his press conference and will likely again make a point of explaining the views of participants who opposed a cut," Goldman economist David Mericle said in a note.

About that dissent: The October meeting saw two "no" votes on the final statement, one from each side of the rate debate. Mericle said that is likely to happen again, accompanied by multiple other "soft dissents" who will represent divergent views on the "dot plot" that indicates, anonymously, the rate outlook for each of 19 individual meeting participants, a group that includes 12 voters.

While Mericle added that there is a "solid case" for a third cut, there are arguments to be made for both sides.

"It's a tough meeting, and so they'll presumably be a few dissents," English said. "It's often hard to get the committee together. You have people who just have very different views about how the economy works and how policy works and so on. But this moment for the economy is particularly fraught."

Even with the dearth of official government data due to the since-settled shutdown, hiring has shown signs of flattening, with sporadic signals that layoffs are accelerating. A Bureau of Labor Statistics report Tuesday showed job openings little changed in October but hiring down by 218,000 and layoffs rising by 73,000.

On the inflation side, the most recent reading of the Fed's preferred gauge showed the annual rate at 2.8% in September, slightly below the Wall Street forecast but still well above the central bank's 2% goal.

Inflation worries

Despite President Donald Trump's protestations that inflation has disappeared, it has at best stabilized and at worst is holding above the Fed's target in part due to the tariffs implemented under his watch. While Fed officials mostly have said they expect the duties to provide a temporary boost to prices, the gap between the current level and the central bank goal is enough to give some economists and policymakers pause.

"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 President Loretta Mester said Tuesday on CNBC. "Right now, inflation is pretty well above the goal, and it's not just all tariff-driven."

Still, Mester thinks the FOMC will approve one more cut Wednesday.

Like market participants, Mester saw a Nov. 21 speech from New York Fed President John Williams as the pivotal sign "quite clearly" that another reduction was coming. Prior to that, markets had been betting against a cut, particularly after Powell said explicitly at his October news conference that a December move was not a "foregone conclusion. Far from it."

"I think they're going to follow through with that last cut," Mester said. "I do hope that they signal that they think the economy has gotten to a place where policy is in a good place and they are going to slow down the cuts, because I am more concerned about the inflation risk, the stickiness."

Aside from rate questions and the dot plot update, the committee may signal its next step regarding management of its balance sheet.

The committee in October signaled that it would halt the process of "quantitative tightening," or allowing maturing bond proceeds to roll off. With pressures ongoing in the overnight funding markets, some market participants expect the Fed will announce it will resume bond purchases, though not a pace that would suggest the "quantitative easing," or QT's opposite.

Source: cnbc

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Justin

Political

Economic

A photo of eight high school students forming a "human swastika" on a California football field went viral online last week, spurring an outcry from the Jewish community and political leaders across Silicon Valley.

The social media post showing the students lying on the ground in the shape of the Nazi symbol at Branham High School in San Jose was posted online on December 3, along with a 1939 antisemitic quote from Adolf Hitler calling for the annihilation of Jews. The incident began to garner national attention on Tuesday.

The image was eventually deleted from Instagram, but screenshots remain online, including one posted by a member of the California State Assembly, Gail Pellerin, along with a statement condemning the incident.

Antisemitic incidents that had been on the rise in the U.S. for years spiked after the October 7, 2023, attack on Israel by Hamas-led militants and Israel's subsequent military offensive in Hamas-controlled Gaza.

The head of the school district of which Branham is a part condemned the post in a statement, calling the swastika "an unmistakable symbol of genocide."

Robert Bravo, superintendent of the Campbell Union High School District, promised parents on Tuesday that the students would be punished, noting that he had "heard from many community members who are sincerely worried that the students involved will not face consequences strong enough to reflect the seriousness of their actions."

But Bravo also said that some had questioned "whether the students should be disciplined at all," while saying that "antisemitism in any form is unacceptable in our district."

"I want to be very clear: the district considers this an instance of hate violence," he wrote. "The district will respond firmly, thoughtfully, and within the full scope allowed by Board Policy and California law."

He was not available late Tuesday to elaborate on his statements.

The San Jose Police were called to the school regarding the matter, according to media accounts. A San Jose police media spokesperson did not immediately respond to calls and emails seeking comment.

"The actions of students who used their bodies to form a swastika, photographed it, and posted it online with their names and a threatening Hitler quote attached, paint a terrifying picture of the hate plaguing our communities," Pellerin, of the State Assembly, said in her post.

Maya Bronicki, an education leader with the Bay Area Jewish Coalition, said the image has rattled the Jewish community.

"These are children," Bronicki said. "I don't know if they are hateful or ignorant, but it represents blind hate."

Branham High principal Beth Silbergeld told students and parents that the post "does not reflect the values of our school and community," and said the incident was under investigation, according to the school's student newspaper, the Branham Bear Witness.

Marc Levine, ADL's Northern California director, said on Tuesday that Branham school administrators have reached out to him.

"We all want to keep hate out of student spaces," he said.

The Jewish watchdog group, the Anti-Defamation League, reported in its annual audit that in 2024 there were more than 9,300 antisemitic incidents across the U.S., marking a 5% increase from 2023 and a 344% increase over the last five years.

Source: Reuters

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James Whitman

Central Bank

Economic

The Bank of Canada today held its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%.

Major economies around the world continue to show resilience to US trade protectionism, but uncertainty is still high. In the United States, economic growth is being supported by strong consumption and a surge in AI investment. The US government shutdown caused volatility in quarterly growth and delayed the release of some key economic data. Tariffs are causing some upward pressure on US inflation. In the euro area, economic growth has been stronger than expected, with the services sector showing particular resilience. In China, soft domestic demand, including more weakness in the housing market, is weighing on growth. Global financial conditions, oil prices, and the Canadian dollar are all roughly unchanged since the Bank's October Monetary Policy Report (MPR).

Canada's economy grew by a surprisingly strong 2.6% in the third quarter, even as final domestic demand was flat. The increase in GDP largely reflected volatility in trade. The Bank expects final domestic demand will grow in the fourth quarter, but with an anticipated decline in net exports, GDP will likely be weak. Growth is forecast to pick up in 2026, although uncertainty remains high and large swings in trade may continue to cause quarterly volatility.

Canada's labour market is showing some signs of improvement. Employment has shown solid gains in the past three months and the unemployment rate declined to 6.5% in November. Nevertheless, job markets in trade-sensitive sectors remain weak and economy-wide hiring intentions continue to be subdued.

CPI inflation slowed to 2.2% in October, as gasoline prices fell and food prices rose more slowly. CPI inflation has been close to the 2% target for more than a year, while measures of core inflation remain in the range of 2½% to 3%. The Bank assesses that underlying inflation is still around 2½%. In the near term, CPI inflation is likely to be higher due to the effects of last year's GST/HST holiday on the prices of some goods and services. Looking through this choppiness, the Bank expects ongoing economic slack to roughly offset cost pressures associated with the reconfiguration of trade, keeping CPI inflation close to the 2% target.

If inflation and economic activity evolve broadly in line with the October projection, Governing Council sees the current policy rate at about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment. Uncertainty remains elevated. If the outlook changes, we are prepared to respond. The Bank is focused on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval.

Information note

The next scheduled date for announcing the overnight rate target is January 28, 2026. The Bank's next MPR will be released at the same time.

Source: BOC

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Glendon

Forex

Economic

The Bank of Canada maintained its target for the overnight rate at 2.25% on Wednesday, with the Bank Rate at 2.5% and the deposit rate at 2.20%.

In its announcement, the central bank noted that major economies worldwide continue to show resilience despite U.S. trade protectionism, though uncertainty remains high. The Canadian economy grew by a stronger-than-expected 2.6% in the third quarter, primarily due to volatility in trade, while final domestic demand remained flat.

"If inflation and economic activity evolve broadly in line with the October projection, Governing Council sees the current policy rate at about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment," the Bank stated.

The labor market has shown some improvement, with solid employment gains over the past three months and the unemployment rate declining to 6.5% in November. However, job markets in trade-sensitive sectors remain weak, and economy-wide hiring intentions continue to be subdued.

CPI inflation slowed to 2.2% in October as gasoline prices fell and food price increases moderated. Inflation has been close to the 2% target for more than a year, while core inflation measures remain in the range of 2.5% to 3%.

In prepared remarks ahead of a press conference set to follow the announcement, Bank of Canada Governor Tiff Macklem highlighted three key messages. First, steep U.S. tariffs on steel, aluminum, autos, and lumber have significantly impacted these sectors, with uncertainty about U.S. trade policy weighing on business investment more broadly. Second, inflationary pressures remain contained despite added costs related to trade reconfiguration. Third, the current policy rate is deemed appropriate for maintaining inflation near target while supporting economic adjustment.

"Increased trade friction with the United States means our economy works less efficiently, with higher costs and less income. This is more than a cyclical downturn—it's a structural transition," Macklem said.

The Bank expects GDP growth to be weak in the fourth quarter before picking up in 2026. It also noted that the recent federal budget includes increased government spending, particularly in defense, which will contribute to growth in both demand and supply over time.

The next scheduled date for announcing the overnight rate target is January 28, 2026, when the Bank will also release its next Monetary Policy Report.

Source: Investing

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Michelle

Forex

Economic

The euro has had a solid year, and analysts at Bank of America Securities stay bullish on the single currency into 2026, seeing a much lower bar for upside European surprises when compared with the end of the second quarter.

At 08:50 ET (13:50 GMT), EUR/USD traded 0.1% higher at $1.1635, and is on course for annual gains of over 12%.

"Following the initial euphoria, Europe sentiment has considerably moderated, with the FX market seeming to attach several (implementation or other) risks to German fiscal and European defence spending, while continuing to expect little on reforms," said analysts at Bank of America, in a note dated Dec. 10.

"Still, fiscal hopes in Europe are in sharp contrast with recurrent concerns in the U.S., Japan, and U.K."

The bank looks for EUR/USD to reach $1.22 by the end of 2026, "though we expect most USD weakness post the first quarter", and also expects gains for the single currency against both the Japanese yen and the British pound.

"Our bullish EUR/USD view reflects mostly, but not solely, U.S. developments: our economists anticipate U.S. and EA growth convergence in 2H 2026. The EA growth acceleration we expect in late 2026 and through 2027 is owing to the German fiscal package and a recovery in external demand, also amid China easing in late 1Q/early 2Q," BofA added.

The European Central Bank could act as a small drag on the single currency in the near term, the bank said, with BofA economists expecting at least one more cut (likely in March) and no hikes through 2027.

"Still, we would focus on real rates: we expect an inflation undershoot in the EA [euro area], but an overshoot in the U.S. and several economies," BofA said.

Source: Investing

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Adam

Commodity

Central banks are accelerating their accumulation of gold (XAU) reserves. In October 2025, central banks added 53 tonnes, marking the most significant monthly increase of the year, according to the World Gold Council. By the end of October, total net purchases reached 254 tonnes.

This makes 2025 the fourth strongest year for central bank gold buying this century. This wave of accumulation underscores how policymakers view gold as a strategic hedge against currency risk. It also highlights its role during periods of political uncertainty and financial instability.

Poland added 16 tonnes, raising its reserves to a record 531 tonnes. Brazil also purchased 16 tonnes, while Uzbekistan, Indonesia, Turkey, the Czech Republic, and the Kyrgyz Republic increased their holdings. In addition, countries with more volatile economies, such as Ghana and Kazakhstan, continued to accumulate gold.

A recent survey indicates that 95% of central banks expect their gold reserves to increase again next year. This broad-based demand reinforces gold’s role as a core reserve asset during times of global uncertainty.

Gold vs. Bitcoin: Diverging Trends in the New Market Cycle

Gold and Bitcoin (BTC) now sit at a significant crossroads. Gold benefits from central‑bank demand, geopolitical stress, and easing expectations from major central banks. However, Bitcoin benefits from risk appetite, institutional flows, and the search for high‑beta exposure. The two assets often diverge. However, the current environment indicates a clear trend in which precious metals are strengthening. At the same time, the momentum of cryptocurrencies is losing pace.

The gold-to-bitcoin ratio has already broken higher. This ratio tracks how many bitcoins one ounce of gold can buy. The chart below shows a confirmed breakout from the descending channel, signalling a major shift toward hard assets with lower volatility. This shift occurs when markets price in softer economic growth, rising political risks, and unstable liquidity conditions.

Gold vs. Bitcoin: How Silver’s Breakout Signals a Major Market Rotation_1

Bitcoin Technical Outlook: Breakdown Threatens Long-Term Trend

As shown in the chart below, Bitcoin has formed a rounding top within an ascending broadening wedge pattern near the $120,000 level. Subsequently, the price has broken below the key support at $100,000 and continues to move lower.

At the same time, strong support remains at the $75,000 level, and a break below this price zone will likely trigger a deeper correction. Conversely, a break back above $100,000 is needed to resume the upward trend in Bitcoin.

Gold vs. Bitcoin: How Silver’s Breakout Signals a Major Market Rotation_2

Overall, the weakness in Bitcoin is aligned with macro conditions. Specifically, the uncertainty surrounding the U.S. dollar and the Fed’s cautious messaging puts pressure on high-beta assets. As a result, if liquidity tightens, Bitcoin may face sustained headwinds.

Gold Technical Setup Remains Bullish as $5,000 Comes Into View

Gold continues to consolidate within a broad bullish structure. In particular, central bank accumulation and falling real yields support the long-term trend. Moreover, the chart below indicates that the price is trading within a strong uptrend, forming an ascending channel pattern, and appears to continue moving higher.

Gold vs. Bitcoin: How Silver’s Breakout Signals a Major Market Rotation_3

A decisive move above $4,380 resistance will likely unlock a rally toward the $5,000 zone. Moreover, the gold-to-silver ratio has broken below a key support level, signalling another bullish move for the metal space. When silver leads, gold tends to follow. This ratio has already broken its long-term support, indicating a significant shift toward precious‑metal outperformance.

Gold vs. Bitcoin: How Silver’s Breakout Signals a Major Market Rotation_4

Silver Breakout Reshapes the Outlook for Gold and Bitcoin

Silver (XAG) is now the strongest performer among monetary metals. The break above $59, along with the formation of a bullish structure, signals the start of a new long-term trend.

The confirmed cup‑and‑handle breakout above $54 was the first clue. The new highs confirm that industrial demand and monetary demand are aligning.

Gold vs. Bitcoin: How Silver’s Breakout Signals a Major Market Rotation_5

This breakout affects both gold and Bitcoin:

For gold and silver, leadership historically precedes explosive upside moves. A falling gold-to-silver ratio is a classic early-cycle signal for strong precious‑metal rallies.

For Bitcoin, silver’s outperformance suggests a rotation away from speculative assets toward real-asset hedges. When silver breaks out, Bitcoin often underperforms due to differences in liquidity and risk premiums.

Silver-to-Bitcoin Ratio Breakout Signals Capital Rotation

The chart below shows that the silver-to-bitcoin ratio highlights a strong breakout from the wedge pattern. Notably, this breakout is a rare and powerful signal, indicating that capital is shifting away from crypto into tangible assets tied to real economic demand.

Gold vs. Bitcoin: How Silver’s Breakout Signals a Major Market Rotation_6

Silver outperforming Bitcoin reflects major macro re-pricing:

The increase in geopolitical risk.

The return of inflation uncertainty.

The liquidity tightening

The increase in industrial‑metal demand

This breakout in the ratio suggests that the next cycle may belong to precious metals, rather than digital assets.

Why Silver Now Leads Gold—and Gold Leads Bitcoin

Silver’s breakout is now the key determining factor. The metal is acting as the “alpha” in the hard‑asset group. Gold benefits from central‑bank buying and safe-haven flows.

Silver benefits from both monetary demand and industrial expansion, especially in solar, EV, and battery supply chains. When silver leads gold and gold leads Bitcoin, the entire market narrative shifts toward real assets.

Conclusion: Silver Leads, Gold Follows, Bitcoin Lags

Gold, silver, and Bitcoin each respond to different macro forces. But today’s environment shows a clear hierarchy:

Silver leads → Gold follows → Bitcoin lags.

Central‑bank demand, geopolitical uncertainty, and ratio breakouts all point toward a new cycle where precious metals outperform digital assets. Silver’s record highs strengthen that case. Bitcoin may still offer volatility and opportunity, but the structural momentum now favours gold and silver.

Source: fxempire

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Warren Takunda

Economic

Fewer than 60,000 people – 0.001% of the world’s population – control three times as much wealth as the entire bottom half of humanity, according to a report that argues global inequality has reached such extremes that urgent action has become essential.

The authoritative World Inequality Report 2026, based on data compiled by 200 researchers, also found that the top 10% of income-earners earn more than the other 90% combined, while the poorest half captures less than 10% of total global earnings.

Wealth – the value of people’s assets – was even more concentrated than income, or earnings from work and investments, the report found, with the richest 10% of the world’s population owning 75% of wealth and the bottom half just 2%.

In almost every region, the top 1% was wealthier than the bottom 90% combined, the report found, with wealth inequality increasing rapidly around the world.

“The result is a world in which a tiny minority commands unprecedented financial power, while billions remain excluded from even basic economic stability,” the authors, led by Ricardo Gómez-Carrera of the Paris School of Economics, wrote.

The share of global wealth held by the top 0.001% has grown from almost 4% in 1995 to more than 6%, the report said, while the wealth of multimillionaires had increased by about 8% annually since the 1990s – nearly twice the rate of the bottom 50%.

The authors, one of whom is the influential French economist Thomas Piketty, said that while inequality had “long been a defining feature of the global economy”, by 2025 it had “reached levels that demand urgent attention”. Just 0.001% Hold Three Times the Wealth of Poorest Half of Humanity, Report Finds_1

Just 0.001% Hold Three Times the Wealth of Poorest Half of Humanity, Report Finds_1

Reducing inequality was “not only about fairness, but essential for the resilience of economies, the stability of democracies, and the viability of our planet”. They said such extreme divides are no longer sustainable for societies or ecosystems.

Produced every four years in conjunction with the United Nations Development Programme, the report draws on the biggest open-access database on global economic inequality and is widely considered to shape international public debate on the issue.

In a preface, the Nobel prize-winning economist Joseph Stiglitz repeated a call for an international panel comparable to the UN’s IPCC on climate change, to “track inequality worldwide and provide objective, evidence-based recommendations”.

Looking beyond strict economic inequality, it found that inequality of opportunity fuels inequality of outcomes, with education spending per child in Europe and North America, for example, more than 40 times that in sub-Saharan Africa – a gap roughly three times greater than GDP per capita. Just 0.001% Hold Three Times the Wealth of Poorest Half of Humanity, Report Finds_2

Just 0.001% Hold Three Times the Wealth of Poorest Half of Humanity, Report Finds_2

Such disparities “entrench a geography of opportunity”, it said, adding that a 3% global tax on fewer than 100,000 centimillionaires and billionaires would raise $750bn a year – the education budget of low and middle-income countries.

Inequality was also fuelled by the global financial system, which is rigged in favour of rich countries, the report said, with advanced economies able to borrow cheaply and invest abroad at higher returns, allowing them to act as “financial rentiers”.

About 1% of global GDP flows from poorer to richer countries each year through net income transfers associated with high yields and low interest payments on rich-country liabilities, it said – almost three times the amount of global development aid.

On gender inequality, the report said a gender pay gap “persists across all regions”. Excluding unpaid work, women earn on average only 61% of what men earn per working hour. Including unpaid labour, that figure falls to just 32%, it added.

The report also highlighted the critical role played by capital ownership in the inequality of climate-changing carbon emissions. “Wealthy individuals fuel the climate crisis through their investments even more than their consumption and lifestyles,” it said.

Global data shows the poorest half of the global population accounts for only 3% of carbon emissions associated with private capital ownership, the report calculated, while the wealthiest 10% account for about 77% of emissions.

“This disparity is about vulnerability,” it said. “Those who emit the least, largely populations in low-income countries, are also those most exposed to climate shocks. Those who emit the most are more insulated against the impacts of climate change.”

The evidence shows that inequalities can be reduced, particularly by public investment in education and health and by effective taxation and redistribution programmes. It notes that in many countries, the ultra-rich escape taxation.

“Effective income tax rates climb steadily for most of the population, but then fall sharply for billionaires and centimillionaires,” the report said. Proportionately, “these elites pay less than most of the households that earn much lower incomes”.

Reducing inequality is a political choice made more difficult by “fragmented electorates, under-representation of workers, and the outsized influence of wealth”, it concluded. “The tools exist. The challenge is political will.”