📄 FOMC Statement: December 2025 – Summary and Economic Insights

The Federal Open Market Committee (FOMC) Statement is a key communication tool used by the Federal Reserve to outline its current view of the U.S. economy and announce monetary policy decisions. The December 2025 statement provides important updates on interest rates, inflation, employment, and the Fed’s balance sheet strategy. Here’s a clear summary tailored to your interest in U.S. economic conditions.

🔑 Key Points from the FOMC Statement

  1. Economic Activity and Growth
    • 📈 The FOMC noted that economic activity in the U.S. has been expanding at a moderate pace.
    • 📉 Job gains have slowed during the year, and the unemployment rate has edged up, though it remains low by historical standards.
    • 📊 Recent indicators confirm these trends, suggesting a cooling but still resilient labor market.
  2. Inflation Developments
    • 💵 Inflation has increased since earlier in the year and remains somewhat elevated.
    • 📉 However, consumer price inflation has continued to ease overall, with the personal consumption expenditures (PCE) price index rising 2.1% over the 12 months ending in April, down from 2.6% at the end of last year.
    • 📉 Core PCE inflation (excluding food and energy) rose 2.5% over the same period, also down from 2.9% at the end of last year.
    • 📉 Most long-term inflation expectations remain anchored near the Fed’s 2% target.
  3. Labor Market Conditions
    • 👷 The labor market is described as “in solid shape,” with the unemployment rate at 4.2% in May, relatively flat since mid-2024.
    • 📉 Job vacancies have continued to edge down, and wage growth, while robust, has slowed from post-pandemic highs.
    • ⚠️ The FOMC highlighted that downside risks to employment have risen in recent months.
  4. Monetary Policy Decisions
    • 📉 The Committee decided to lower the target range for the federal funds rate by 0.25 percentage points to 3.5%–3.75%.
    • 🗳️ The decision was not unanimous: one member preferred a larger cut (0.5%), while another preferred no change.
    • 📉 The interest rate paid on reserve balances was lowered to 3.65%, and the primary credit rate was reduced to 4.0%.
  5. Balance Sheet Policy
    • 💼 The Fed continued reducing its holdings of Treasury and agency securities but decided to further slow the pace of this decline.
    • 📉 Starting December 1, all principal payments from agency securities will be reinvested into Treasury bills, aiming for a smooth transition to ample reserve balances.
    • 📉 The reduction cap for Treasury securities was lowered to $5 billion per month, and for agency MBS, it remains at $35 billion per month.
  6. Forward Guidance and Risk Assessment
    • 🔍 The FOMC emphasized its commitment to maximum employment and 2% inflation.
    • 📊 The Committee will carefully assess incoming data, the evolving outlook, and the balance of risks before making further policy adjustments.
    • ⚠️ The statement notes elevated uncertainty about the economic outlook and signals readiness to adjust policy if risks to its goals emerge.

📚 Summary

The December 2025 FOMC Statement reflects a cautious but responsive approach to monetary policy. The Fed recognizes that while the U.S. economy is growing moderately and the labor market remains strong, both job gains and inflation have slowed. Inflation is still above the 2% target but is trending downward. In response to increased downside risks to employment and persistent inflation, the FOMC lowered the federal funds rate by 0.25 percentage points and slowed the pace of balance sheet reduction. The Committee remains vigilant, signaling that future policy will depend on economic data and risk assessments.

References:

FOMC Statement, Federal Reserve

Find out how the Federal Open Market Committee (FOMC) statement impacts you and your business.