Markets in a Minute - The Fed's Final Act of 2025: More Rate Cuts?

December 09, 2025

Kara Murphy, CFA

The Federal Reserve's final meeting of the year is about more than just interest rates. It's about leadership, politics, and the future of the central bank. As Fed Chair Jerome Powell enters the final stage of his tenure, he faces conflicting signals from the labor markets and inflation while also navigating internal disagreement and growing political pressure to accelerate economic growth. His decisions over the next few months will help influence the direction of the economy and his own legacy. In this week's Markets in a Minute, we review Powell's precarious position and how his predecessors are remembered.

The Tug of War

The Fed’s two primary goals are at odds. Inflation remains above the 2% target, and tariffs still have the potential to raise prices for consumers. Meanwhile , labor market weakness is becoming harder to ignore as job creation and wage growth continue to decelerate.

These opposing forces between price levels and employment create a challenge for Powell and team. Cutting rates too quickly could escalate upward inflationary pressure, but holding rates at current levels could dampen consumer confidence and push the economy closer to a recession.

This dilemma is playing out within the committee members of the Fed, where the growing divergence of opinions is becoming increasingly difficult for Powell to navigate. In addition, the government shutdown has delayed the release of official data and left decision-makers “driving through a fog."

Political Pressure

The independence of the Fed from government influence has been a key element to its credibility, but now that is being tested. President Trump has criticized Powell for being too slow to cut rates, and this rhetoric is adding more pressure to how the Fed conducts itself.

While political pressure on monetary policy isn’t a new phenomenon, the stakes feel higher as Powell approaches the end of his term. There is enhanced scrutiny of the Fed’s decision-making, and the perception that rate cuts are politically motivated could weaken the central bank’s ability to steer the economy.

The Last Rate Cut of Powell’s Term?

Against this backdrop, this week’s meeting could determine how Powell is remembered. If another rate cut is delivered as expected, it will be a sign that weakness in the labor market outweighs concerns of elevated prices.

But the implications go deeper. For Powell, this decision could define his tenure as a Chair that either prioritized weaker employment at the right time or overlooked warning signs of higher inflation.

Markets will be paying close attention to signals of what’s coming in 2026. With Powell’s successor set to take over in May, will the new Chair continue cutting rates? Kevin Hassett is the frontrunner to replace Powell, and his close ties to Trump are driving a narrative that a sustained rate-cutting cycle will take place in the second half of next year.

Past Fed Presidents and Their Legacies

Past Fed chairs have each put their unique stamp on the central bank, driven both by their individual approaches and the particular economic situation they faced. Here we take a look at what could be Powell’s legacy in the context of the Fed’s previous five leaders.

Fed Chair

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