Wall Street awaits Federal Reserve rate decision

Edited by Alexandra White, Zehra Munir and Peter Wells in New YorkFT reportersWelcome to the Financial Times’ live coverage of what could be one of the most contested Federal Reserve meetings in decades.The central bank is widely expected to cut interest rates for the third meeting in a row.At the previous meeting in October, three of the rate-setting committee’s 12 voters did not side with chair Jay Powell’s preference for a quarter-point reduction.Among the issues that could divide members are concerns that US inflation is not yet under control, a situation that would argue for rates remaining on hold. Conversely, those in favour of further rate cuts would point to signs that the labour market has deteriorated and that the economy needs support.A cut today would be the sixth time the Fed has lowered rates since kicking off its easing cycle in September 2024.Ian Hodgson in Washington Consumer spending — which makes up two-thirds of US economic activity — has remained strong.That is despite rising uncertainty about job security and declining consumer sentiment, but zoom in and the picture is far less rosy.Consumer spending is propped up by the highest earners. The top 10 per cent of earners now account for half of consumer spending, according to some estimates.Meanwhile, lower-income households have pulled back spending as debt piles up. Poorer households have seen lower wage growth and Americans have long since burned through pandemic-era excess savings. Low-income consumers now have higher inflation-adjusted credit card debt than they did in 2019, according to the Boston Fed.Total household debt hit a record $18.6tn in the third quarter of 2025, with credit card debt stacking up a persistent 5.75 per cent increase. Delinquency rates, meanwhile, have ticked back up to pre-pandemic levels.Claire Jones in Washington The race to become the next Federal Reserve chair has increasingly looked like Kevin Hassett’s to lose. Hassett emerged as betting markets’ favourite in early October. But in recent weeks the odds of the White House economist securing his boss Donald Trump’s nomination have doubled to, at times, higher than 80 per cent. Several bond market investors, however, had warned US Treasury secretary Scott Bessent of their concerns that Hassett was too close to Trump and would try to cut rates indiscriminately to please the president, the Financial Times reported last week.Bond investors fear that sharp falls in the federal funds rate would stoke inflation and raise the US government’s longer-term borrowing costs.Some content could not load. Check your internet connection or browser settings.Hassett has sought to strike a balance in recent days, saying at a Wall Street Journal event that while he thought there was room for a cut of more than a quarter point at the December vote, he would not carry on lowering borrowing costs if it looked as though inflation was about to spiral out of control. While Trump has claimed that he has made his choice, the race is not quite over yet. Trump and Bessent met with Hassett’s rival — former Fed governor Kevin Warsh — on Wednesday. At least one other interview could take place next week before an announcement comes early next year.Ian Hodgson in WashingtonDonald Trump has claimed the nation’s affordability crunch is a “hoax” created by the Democratic party, but rising prices will be top of mind for members of the Federal Reserve’s board of governors who are advocating against a rate cut.Inflation data released last week showed annual growth in personal consumption expenditure price index jumped to 2.8 per cent in September, up from 2.3 per cent in April.After promising to bring down prices “starting on day one”, the president’s policies, including on tariffs and a crackdown on undocumented migrants, are widely seen as exacerbating elevated inflation.Under the One Big Beautiful Bill act, many low-income households will lose access to health insurance subsidies and supplemental food support.Households are feeling the strain. A recent Pew Research poll found nearly two-thirds of Americans were very concerned about the price of food and consumer goods.Some content could not load. Check your internet connection or browser settings.Claire Jones in WashingtonWednesday’s Federal Open Market Committee vote could see dissent on a scale not witnessed in decades.Federal Reserve decisions under chair Jay Powell have been characterised by strong levels of agreement. But at the October decision, two of the committee’s 12 voters said they did not support the quarter-point cut — Kansas City Fed president Jeff Schmid wanted rates to remain on hold, while Trump ally Stephen Miran again supported a “jumbo” half-point move.Some content could not load. Check your internet connection or browser settings.Since then, several regional Fed presidents have signalled they share at least some of Schmid’s doubts that data convincingly shows US inflation is under control. They include voters such as the Boston Fed’s Susan Collins, the St Louis Fed’s Alberto Musalem and Austan Goolsbee of the Chicago Fed. Powell, who is expected to support a rate cut, may persuade some of the more hawkish regional central bank presidents to stand by him and avoid a situation where four people dissent for the first time since 1992.Federal Reserve chair Jay Powell says a December rate cut is not a foregone conclusionZehra Munir in New York Fed cuts rates for the first time in four years. The “jumbo” half-point reduction takes the federal funds rate to 4.75-5 per centCentral bank follows up with quarter-point cutThe third cut in row — another quarter-point reduction — brings rates to a range of 4.25-4.5 per cent After a nine-month pause, the Fed cuts rates by a quarter-pointBack-to-back reductions bring the range for the federal funds rate to 3.75-4 per cent.

Chair Jay Powell says a December reduction was not a “forgone conclusion”