Fed Watch: Recalibrating The 'Recalibration'

WisdomTree5.78K FollowersFollow5ShareSavePlay(5min)CommentsSummaryWith a third consecutive rate cut bringing the Fed Funds range to 3.50%–3.75%, the Fed may pause for now as it reassesses the effectiveness of its “risk management” approach amid mixed economic signals.Deepening divisions within the FOMC suggest that further easing will face a higher bar, especially as inflation remains above target and labor market data offers limited clarity.Investors should expect heightened data dependency going into 2026, with future policy direction hinging on labor market and inflation reports, which has important implications for fixed income positioning. Nuthawut Somsuk/iStock via Getty Images By Kevin Flanagan As was widely expected, the Federal Open Market Committee (FOMC) implemented another 25 basis point (bp) rate cut at the December FOMC meeting, bringing the new Fed Funds trading range down to 3.50%-3.75%.This article was written byWisdomTree5.78K FollowersFollowIn 2006, WisdomTree launched with a big idea and an impressive mission — to create a better way to invest. We believed investors shouldn’t have to choose between cost efficiency and performance potential, so we developed the first family of ETFs designed to deliver both. Today, WisdomTree offers a leading product range that offers access to an unparalleled selection of unique and smart exposures.Quick InsightsWhat is the Fed's current stance after the December rate cut?The Fed is now at or near a 'neutral' policy stance, having cut rates by 175 bps over 15 months, and is increasingly data-dependent moving forward.What conditions must be met for further rate cuts in 2026?Additional rate cuts will require clear evidence of labor market cooling and further progress toward the 2% inflation target, given heightened internal dissent.How did internal FOMC dynamics influence the December decision?The rate cut was less consensus-driven, with dissent among voting members, indicating a higher threshold for future easing unless supported by incoming economic data.Recommended For You