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Dec FOMC Meeting Recap: Quarter-Point Cut, Cautious Outlook Ahead

The Federal Open Market Committee (FOMC) held its meeting on December 9–10, 2025, and decided to lower the federal funds rate target range by 25 basis points to 3.5%–3.75%. This marks the third consecutive rate cut and a cumulative reduction of 100 basis points since the beginning of the year. Economic activity continues to expand at a moderate pace, but job growth has slowed this year, with the unemployment rate rising slightly to 4.5% in September, the highest level in 2025. Inflation has rebounded since early this year and remains elevated, with core PCE rising 2.8% year over year in September, still above the 2% target. Downside risks in the labor market have recently intensified, leading the Committee to judge that the balance of risks between its dual mandate of maximum employment and price stability has deteriorated. This prompted a rate cut to support employment. Persistent inflation pressures are partly linked to bank reserve balances falling to ample levels, prompting the Federal Reserve to restart purchases of short-term Treasury bills at an initial pace of 40 billion dollars per month to maintain adequate reserve supply. Policy decisions remain subject to significant uncertainty, including labor market trends, inflation expectations, and global financial conditions. Three members dissented in this meeting: one favored a larger 50-basis-point cut, while two opposed any rate cut. Along with the release of the final policy decision of the year, the Fed also published the final edition of the Summary of Economic Projections (SEP), which includes officials’ outlook for the economy and interest rates in the coming years. The latest projections show core PCE falling to 3.0% in 2025; GDP growth in 2026 being revised up to 2.3%; the unemployment rate remaining at 4.4%; but the interest rate path showing only one additional rate cut each in 2026 and 2027. The post-meeting statement adopted a slightly more restrictive tone, indicating a higher bar for future policy adjustments and limited room for further easing. In the near term, markets will focus on employment and CPI data to be released on December 16 and 18. The medium-term outlook leans hawkish, with the likelihood of another rate cut before June diminishing, and investors should remain alert to rising uncertainty risks.

US Fed December Meeting: Rate Cut Expectations and Policy Pivot

The outcome of the Federal Reserve’s December policy meeting will be announced in the early hours of the 11th Taipei time. The market broadly expects another 25 basis-point rate cut, bringing the policy rate to the 3.50 to 3.75 percent range. Signals of an economic slowdown have become increasingly clear, yet inflation has not returned to target, prompting policymakers to proceed cautiously. This meeting will update the Summary of Economic Projections to reinforce policy continuity for the coming year, while Chair Powell’s remarks will give investors insight into the data-dependent approach guiding future actions. The recent cooling in the labor market, including slower job growth and a slight rise in the unemployment rate, provides room for continued rate cuts. However, the slow pace of disinflation keeps some officials alert to upside risks, resulting in internal differences of opinion. The conclusion of quantitative tightening earlier this month has tightened liquidity in the financial system, and the Federal Reserve is evaluating whether to introduce new asset-purchase tools to stabilize short-term interest rates. Externally, global economic uncertainties and the policy direction of the new U.S. administration add complexity to the outlook, pushing the policy path toward a more gradual adjustment. Overall, the probability of a December rate cut is high, but the Federal Reserve is expected to use its statement and dot plot to signal limited room for easing next year, likely only one or two more cuts. In the short term, improved risk sentiment may boost U.S. equities and bonds, though capital flows will still depend on the design of any balance-sheet expansion and the broader liquidity environment. In the medium term, if inflation or employment data become volatile again, the risk of a policy reversal will increase, making a diversified allocation strategy advisable. The results of this meeting will set the tone for the monetary environment heading into 2026, maintaining a cautiously optimistic overall stance.

US Cuts Tariffs on South Korea

The United States recently confirmed it will lower tariffs on South Korean imports from 25 percent to 15 percent, retroactive to November 1, 2025. This move significantly reduces the burden on major Korean export items such as automobiles and aircraft components. Overall industry costs are expected to decline by about 10 percent compared with the previous month, while easing the market uncertainty caused by the earlier high tariffs. Automakers like Hyundai and Kia are expected to benefit the most, potentially saving billions of dollars in tariff payments starting in November and setting a new record low tariff level since the bilateral trade agreement took effect. On South Korea’s side, the National Assembly passed a bill on November 26 to fulfill its 350 billion dollar strategic investment commitment to the United States, meeting the requirements outlined in the U.S. memorandum and prompting the U.S. Department of Commerce to finalize the tariff reduction. This investment framework originated from the summit between South Korean President Lee Jae Myung and U.S. President Trump on October 29, where the two sides reached an “investment-for-tariffs” agreement, including 200 billion dollars in cash investments and a 150 billion dollar shipbuilding cooperation project. The Trump administration is promoting this approach to strengthen U.S. industrial interests, while South Korea is moving quickly through legislation to prevent its electronics and automotive sectors from continuing to face a 25 percent tariff burden. In the short term, the tariff reduction is expected to support growth in Korean exports to the U.S., with automobile sales in the first quarter of 2026 projected to rise more than 5 percent year over year, helping revive the supply chain. In the midterm, the U.S.–Korea trade framework may expand to more product categories. South Korea will need to continue meeting its investment commitments to maintain the reciprocal 15 percent tariff rate, the same level granted to Japan and the European Union, and reduce risks in future negotiations. While the overall market outlook is generally positive, global trade conditions remain uncertain under Trump’s policies. South Korean companies will need to strengthen domestic production strategies to better withstand volatility.

The Fed's Latest Beige Book: Cooling Consumer Spending and Softening Labor Market

The Federal Reserve’s November 2025 Beige Book indicates that overall economic activity showed little change compared with the previous report, though some districts experienced slight declines. Consumer spending continued to weaken, particularly in the first half of November, as automobile sales dropped noticeably following the expiration of federal tax credits. The labor market softened as firms largely implemented hiring freezes or only replaced departing employees, leading to further slowing in employment growth. On the price front, input costs generally increased, and overall prices rose moderately due to higher tariffs as well as rising insurance, utility, and healthcare expenses. The slowdown in consumer spending and employment was driven by several factors. The government’s earlier prolonged shutdown heightened market uncertainty and reduced consumers’ willingness to spend. Advances in artificial intelligence replaced certain entry-level positions, boosting business efficiency but reducing the need for new hires. Toward the end of the year, rising cost pressures, particularly tariff-related increases in input costs that fed into final prices, made consumers more price-sensitive and restrained spending. Additionally, performance in the financial and real estate sectors was mixed, with notable regional differences in construction activity and office real-estate markets. In the short term, the Beige Book suggests rising risks of further economic slowdown, and businesses generally maintain a cautious outlook. The Federal Reserve may lean toward easing policies in response to cooling consumption and a weakening labor market. In the medium term, cost pressures remain, and differing corporate attitudes toward price pass-through may keep inflation trends volatile. Policymakers will closely monitor upcoming official data releases, particularly employment and inflation indicators, to guide monetary policy adjustments. Markets broadly expect room for a rate adjustment in December, with labor-market and consumption trends continuing to serve as key indicators.

Gold and Silver Surge Again: Demand Accelerates Driven by Capital and Policy Synergy

Gold and silver prices have clearly rebounded over the past two months. According to ANZ’s report, as of September 2025, gold has reached around 4,000 USD per ounce, rising more than 10 percent from the beginning of the year. Silver has surpassed 44.7 USD per ounce, hitting a multi-year high. In mid-November, supported by capital inflows and policy expectations, gold and silver strengthened again and remained near multi-year highs. Overall, both metals showed double-digit growth compared with the same period last year, reflecting rising risk-aversion and steady industrial demand. Recently, gold and silver prices moved higher once more, driven mainly by three factors. First, the expansion of the US fiscal deficit and the possibility of a more accommodative monetary policy from the Federal Reserve have increased market liquidity, enhancing the appeal of precious metals as safe-haven assets. Second, structural demand driven by the energy transition, especially strong silver demand from the solar industry, has further supported silver prices. In addition, rising geopolitical tensions and greater macroeconomic uncertainty have reinforced gold’s role as a store of value, while a weaker US dollar and shifts in the global monetary system have strengthened upward momentum for gold. In the short term, expectations of policy easing and safe-haven demand will likely keep gold fluctuating around 4,000 USD, while silver has the potential to challenge the 50 USD level. In the medium term, structural demand from new energy and industrial applications will continue to support silver, while gold is expected to benefit from a weaker dollar and central banks’ ongoing accumulation, maintaining a bullish bias. Although policy shifts may create short-term volatility, the fundamentals of the gold and silver markets remain solid, reflecting the long-term value re-rating under global economic and energy-structure changes. Investors may continue monitoring monetary policy and geopolitical risks to capture potential price movements. Read More at Datatrack