On December 10 (local time), the Federal Reserve concluded its two-day monetary policy meeting and announced a 25-basis-point cut in the target range of the federal funds rate to 3.5%-3.75%. This marks the third consecutive rate cut since September this year and the sixth cut since the launch of the current rate-cutting cycle in September 2024. The resolution was passed with 9 votes in favor and 3 against. The three dissenting committee members either advocated for a larger rate cut or insisted on keeping rates unchanged, resulting in the biggest policy divergence since 2019.
According to the Fed’s statement, although the U.S. economy is expanding moderately, job growth has slowed down and the unemployment rate has risen. While overall inflation remains high, core inflation has improved significantly. Fed Chair Jerome Powell emphasized that there is no preset path for monetary policy, and decisions will be made based on data on a meeting-by-meeting basis. He also largely ruled out the possibility of future interest rate hikes. In addition, the Fed announced that it will purchase $40 billion of Treasury bills per month starting from December 12 to replenish reserves.
The market responded positively to the decision. U.S. stocks closed higher, with the Dow Jones Industrial Average rising 1.05% to 48,057.75 points, and the S&P 500 Index approaching its all-time high. Most U.S. Treasury yields fell, with the 2-year Treasury yield dropping 7.24 basis points. However, Donald Trump expressed dissatisfaction with the magnitude of the rate cut, arguing that it should be doubled. Analysts pointed out that the Fed may be close to the end of its preventive rate cuts, and the pace of future easing will highly depend on labor market and inflation data.
As reported on December 11, the Ministry of Finance will issue refinancing special government bonds maturing in 2025 on December 12, with a total scale of RMB 750 billion. The issuance will be conducted through targeted placement in the national inter-bank bond market for relevant banks, divided into two varieties: 10-year and 15-year, with scales of RMB 400 billion and RMB 350 billion respectively.
