The Fed steps on stage at 2 p.m. ET. The final policy decision of 2025 is minutes away. Markets are braced for a quarter point cut. The real story is what comes next. I am watching the dot plot and Powell’s tone for the 2026 path.
The decision window
The Federal Reserve will release its statement and updated projections at 2:00 p.m. ET, with Chair Jerome Powell at the mic at 2:30 p.m. ET. Futures point to a cut of 25 basis points, which would set the federal funds target near 3.50 to 3.75 percent. That part is expected. The surprise will come from the Summary of Economic Projections, and the dot plot that shows where each policymaker thinks rates should go.
The Committee is split. Some officials see softer labor data and want to insure against a sharper slowdown. Others believe inflation progress is fragile, and want to hold fire. Dissent is possible today. If we see two or more no votes, the message will feel less dovish.
Policy statement and projections arrive at 2:00 p.m. ET. Powell speaks at 2:30 p.m. ET.
One cut or a true easing cycle
Here is the pivot point. If the median dot for 2026 drops meaningfully, that signals a broader easing cycle. If the dots keep the policy rate near neutral and show a long plateau, today looks like a one off.
Powell’s words will fill in the gaps. If he stresses two things, slower growth and confidence that inflation is cooling, markets will price more cuts. If he points to sticky services prices and wage pressure, the bar for further easing stays high.
Watch how the Fed frames the labor market. Job openings have bounced, but quits are low and layoffs have risen. That is mixed. A nod to slack would support more easing in 2026. A nod to resilience would argue for patience.
Market setup right now
Positioning is tight into the print. A cut is priced at roughly nine in ten odds. That shifts focus to the path, not the point. The front end of the Treasury curve will move first. A cycle signal likely steepens the curve, with two year yields falling faster than tens. A one and done signal could flatten the curve as growth fears build.
Stocks are sitting on the fence. Rate sensitive groups, like real estate and utilities, want a cycle. Banks want a steeper curve to help net interest margins. Small caps need easier financial conditions to breathe. The dollar is the swing vote. A dovish dot plot would likely weaken the dollar, which supports gold and commodities. A hawkish dot plot could firm the dollar and pressure cyclicals.
Expect sharp two way swings in the first 15 minutes after each release.
Investment playbook for the afternoon
If the Fed opens the door to multiple cuts in 2026, I would expect a classic risk on rotation. Duration outperforms, small caps rally, housing and REITs catch a bid. If Powell leans cautious, defensive growth can lead, with quality balance sheets and high free cash flow names in focus.
- What signals a cycle: a lower 2026 median dot, softer core inflation in the SEP, and Powell saying risks are balanced or tilted to growth.
- What signals one and done: firm inflation in the SEP, a higher long run dot, and Powell stressing vigilance on prices.
In credit, investment grade should hold better than high yield if the tone is hawkish. In currencies, a dovish pivot would likely weigh on the dollar and help exporters. In commodities, gold tends to like falling real yields, which a cycle would bring.
Set alerts on the two year yield, the dollar index, and S&P futures. They will tell you the story first.
Leadership and the 2026 path
Policy is also about people. Powell’s term ends in May 2026. The market is already gaming the succession. A successor who favors rule based policy could tilt the dots higher. A successor who puts more weight on employment could lean easier. Today’s dots will be read with that lens. If the range of 2026 views is wide, leadership risk will matter more next year.
Frequently Asked Questions
Q: What time are the key events today?
A: The policy statement and projections hit at 2:00 p.m. ET. Powell starts the press conference at 2:30 p.m. ET.
Q: Is the Fed cutting rates today?
A: Markets expect a 25 basis point cut. The larger question is how many, if any, cuts come next year and in 2026.
Q: What is the dot plot and why does it matter?
A: It shows where each Fed official thinks rates should be over the next few years. The median dot is a guide for the likely path.
Q: Which markets will move first?
A: Front end Treasuries and the dollar usually react within seconds. Stocks and credit follow as the message sinks in.
Q: What should long term investors do?
A: Focus on balance sheets, cash flow, and valuation. Use any knee jerk swings to improve quality and diversify rate risk.
Conclusion
We are minutes from the final word of 2025. A 25 basis point cut looks likely. The dots and Powell’s tone will decide whether this is a quick trim or the opening act of a full easing cycle. I will be watching the front end, the dollar, and banks for the cleanest read. Stay nimble, and respect the tape.
