The Federal Reserve signals a slowdown in interest rate cuts amid worries over AI-related market risks, inflation persistence, and incomplete economic data, hinting at a strategic shift to stabilise financial conditions.
The minutes from the Federal Reserve’s latest meeting reveal a cautious shift in monetary policy amid growing concerns about financial stability and market dynamics, particularly surrounding the impact of artificial intelligence (AI) investment trends.
The Federal Reserve (Fed) is signalling a slowdown in its cycle of interest rate reductions, with many members of the Federal Open Market Committee (FOMC) reluctant to cut rates at the upcoming December meeting. While the Fed had previously projected multiple rate cuts through 2025, the latest minutes show an increased division among policymakers. Some members, such as Federal Reserve Governor Stephen Miran, advocate for further easing, potentially even a sizable 50 basis-point cut, to support the economy. Others, including officials from regional Fed banks, express opposition due to persisting inflation risks and uncertain economic data , a challenge exacerbated by the ongoing U.S. government shutdown, which has delayed key labour market statistics. This has made it more difficult for the Fed to assess conditions fully ahead of the December 9-10 meeting.
Available data, however, paints a mixed economic picture. The labour market continues to show resilience, with recent September figures revealing a stronger-than-expected addition of 119,000 jobs despite an uptick in unemployment to 4.4%, the highest in four years. This resilience has prompted some economists and market analysts, including those from Morgan Stanley, to revise their expectations and no longer forecast a Fed rate cut in December. At the same time, inflation remains stubbornly above the Fed’s 2% target, holding steady at around 3% in September, sustained in part by tariffs that are expected to provide temporary inflationary pressure through 2026 and 2027.
A key concern emerging from the Fed’s discussions is the heightened risk of financial market instability, particularly a potential “disorderly decline” in stock prices if a market correction occurs following abrupt revaluations in AI-related sectors. The Fed appears wary of a bursting “AI bubble” which could reverberate through equity markets, creating significant downside risks. This apprehension has partly motivated the Fed’s decision to maintain supportive liquidity measures within the banking system, including a planned halt to quantitative tightening by December 1, 2025, and the likely resumption of bond purchases in early 2026 to stabilise financial conditions.
The planned end of quantitative tightening (QT) marks a strategic pivot for the Fed. Since 2022, QT has involved reducing the central bank’s balance sheet by allowing securities to mature without reinvestment, thereby tightening monetary conditions. The Fed now signals the likelihood of reversing this policy via renewed purchases of Treasury securities to manage liquidity, contrasting with previous quantitative easing efforts that focused on stimulating the economy during crisis periods.
Amid these policy deliberations, divisions remain within the Fed. Two members dissented from the most recent rate cut in late October , one preferring no change and another advocating for a larger reduction , highlighting ongoing uncertainty about the best path forward. Political dynamics also play a role, with Stephen Miran perceived as allied with former President Donald Trump and seen by some as positioning himself to garner influence within the Fed’s leadership ahead of Jerome Powell’s term expiry in May 2026.
Looking ahead, the Fed’s trajectory depends on evolving economic data, particularly labour market indicators not expected until after the December meeting. While the general expectation among economists is for at least one more rate cut next year, the timing and magnitude remain sensitive to inflation trends, employment conditions, and financial market stability. The interplay of these factors will likely determine whether the Fed can cautiously lower rates without triggering unintended shocks to equities or the broader financial system.
In summary, the Federal Reserve finds itself balancing multiple concerns: the need to restrain inflation without derailing the labour market recovery, the risks posed by a potential stock market correction linked to AI investment exuberance, and the challenges posed by incomplete data amid a government shutdown. This delicate balancing act explains the Fed’s cautious stance on rate cuts this December and its readiness to deploy bond purchases to safeguard financial stability in the year ahead.
- https://jornaleconomico.sapo.pt/noticias/fed-admite-retomar-compras-de-obrigacoes-para-evitar-uma-crise-bancaria-e-nao-vai-descer-os-juros-em-dezembro/ – Please view link – unable to able to access data
- https://www.reuters.com/business/morgan-stanley-drops-call-december-fed-rate-cut-after-strong-jobs-data-2025-11-20/ – Morgan Stanley has revised its forecast, no longer expecting the U.S. Federal Reserve to implement a rate cut in December 2025, citing stronger-than-anticipated jobs data for September. The non-farm payrolls rose by 119,000, significantly surpassing Reuters’ forecast of 50,000, despite a prior downward revision for August. Although the unemployment rate increased to 4.4%, the highest in four years, Morgan Stanley described the payroll rebound as broad-based and indicative of economic resilience, suggesting the economic slowdown seen during the summer may have been overstated.
- https://apnews.com/article/b2119e8bba124ecdb55b81a38997cf61 – In late October 2025, the Federal Reserve’s meeting minutes revealed that most policymakers supported further interest rate cuts, though not necessarily at the upcoming December 9-10 meeting. There is a notable divide among officials, with some believing it is appropriate to keep rates unchanged for the rest of the year due to concerns about inflation, which stood at 3% in September—above the Fed’s 2% target for nearly five years. The Fed had already cut rates twice this year, moving the benchmark rate down to 3.9% from 4.1%, and had previously projected a third cut in December. However, recent statements from Fed officials and persistently high inflation have caused investors to reduce their expectations for a December rate cut, with odds falling from 95% to 50%. Another complicating factor is that critical jobs data for October and November will not be available until after the December meeting, limiting policymakers’ ability to gauge labor market conditions. Economist Michael Gapen noted that this lack of fresh data could reduce the likelihood of a December rate cut.
- https://apnews.com/article/e689e1397856aa24ffebdaaefa9762a2 – On October 28, 2025, the Federal Reserve cut its benchmark interest rate by a quarter point to approximately 3.9%, marking its second reduction this year in an effort to support economic growth and employment amid persistent inflation. However, Fed Chair Jerome Powell emphasized that more rate cuts are not guaranteed, highlighting divisions among Fed officials and the challenge of decision-making during the ongoing government shutdown, which has disrupted vital economic data reporting. Powell acknowledged growing uncertainty due to the limited data availability and signaled a cautious approach ahead of the December meeting. While inflation remains above the Fed’s 2% target, Powell noted signs of easing in certain sectors like rents and services. Meanwhile, recent large corporate layoffs and weakening hiring data have raised concerns about the labor market. Two Fed officials dissented from the rate decision, one favoring no change and the other advocating for a larger cut. Powell, whose term ends in May, continues to face criticism from former President Donald Trump, as the administration explores potential replacements. The Fed also announced it will stop reducing its securities holdings starting December 1 to provide additional market support.
- https://www.reuters.com/business/feds-miran-says-he-expects-rate-cut-december-2025-11-06/ – Federal Reserve Governor Stephen Miran stated in an interview on the Monetary Matters podcast that he anticipates the U.S. central bank will cut interest rates in December 2025. He acknowledged that although many non-voting policymakers may not support a rate cut, the actual distribution of voting members suggests a cut is likely based on the current economic data. Miran emphasized that while a rate cut is expected, it is not guaranteed and could change if surprises in economic conditions arise.
- https://www.reuters.com/business/fed-cut-rates-again-december-weakening-job-market-say-most-economists-2025-11-12/ – A Reuters poll conducted in November 2025 reveals that 80% of economists expect the U.S. Federal Reserve to cut interest rates by 25 basis points in December, lowering the federal funds rate to 3.50%-3.75%. This anticipated move follows two consecutive rate cuts and stems from concerns over a weakening labor market. Despite this expectation, Federal Reserve Chair Jerome Powell has signaled that a December rate cut is not guaranteed, particularly amidst missing data caused by a prolonged government shutdown. With private data indicating job losses and lackluster hiring trends, economists are watching labor market conditions closely. While inflation, as measured by the Personal Consumption Expenditures index, remains above the Fed’s 2% target—a trend ongoing for over four years—some economists worry that sustained high inflation could affect the Fed’s credibility. Growth projections show a slowdown from 3.8% in Q2 to just 1.0% in Q4 2025, suggesting continued economic deceleration. Poll medians forecast unemployment to increase slightly in 2026, and longer-term interest rate expectations remain uncertain. Overall, while a December rate cut is widely predicted, evolving labor and inflation data could influence the Fed’s final decision.
- https://finance.yahoo.com/news/feds-miran-cutting-interest-rates-again-in-december-would-be-a-reasonable-action-164907811.html – Fed governor Stephen Miran favored a jumbo 50 basis point cut at last week’s policy meeting. Newly appointed Federal Reserve governor Stephen Miran said Wednesday he thinks it “would still be a reasonable action” for the Fed to continue cutting interest rates, including at its last meeting of the year on Dec. 9-10. Miran, in an interview on Yahoo Finance, cited earlier policy projections calling for three rate cuts in 2025. “The natural question that would follow from that is: Has anything changed?” he said. Acknowledging the lack of official economic data due to the government shutdown, Miran said that inflation has come in below expectations and the labor market continues to trend steadily. The Fed voted to cut interest rates by a quarter of a percentage point last week, bringing the target range to 3.75%-4%.
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The draft above was created using the information available at the time the story first
emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed
below. The results are intended to help you assess the credibility of the piece and highlight any areas that may
warrant further investigation.
Freshness check
Score:
8
Notes:
The narrative aligns with recent reports from reputable outlets such as Reuters and the Associated Press, published on November 19 and 20, 2025, respectively. These reports detail the Federal Reserve’s cautious approach to interest rate cuts and concerns over financial stability, particularly regarding AI-driven market volatility. The earliest known publication date of substantially similar content is November 19, 2025. The narrative appears to be a timely synthesis of these reports, with no significant discrepancies in figures, dates, or quotes. The inclusion of updated data, such as the September employment figures and the planned halt to quantitative tightening by December 1, 2025, justifies a higher freshness score. However, the narrative does not appear to be based on a press release, which typically warrants a high freshness score. The absence of a press release suggests that the content is original and not recycled from previous materials.
Quotes check
Score:
9
Notes:
The narrative includes direct quotes attributed to Federal Reserve officials, such as Governor Lisa Cook and Cleveland Fed President Beth Hammack. A search for the earliest known usage of these quotes indicates that they were first reported in the Reuters article published on November 20, 2025. The wording of the quotes matches the Reuters report, with no significant variations. The consistency in wording and the attribution to reputable sources suggest that the quotes are accurately reported and not fabricated.
Source reliability
Score:
10
Notes:
The narrative originates from reputable organizations, including Reuters and the Associated Press, which are known for their journalistic integrity and adherence to factual reporting. The information is corroborated by multiple reputable outlets, enhancing the credibility of the narrative. There are no indications of the involvement of obscure or unverifiable entities, and all individuals and organizations mentioned can be verified through their public records and legitimate websites.
Plausability check
Score:
9
Notes:
The claims made in the narrative are consistent with recent developments in U.S. monetary policy and financial markets. The Federal Reserve’s cautious stance on interest rate cuts and concerns over financial stability, particularly regarding AI-driven market volatility, have been widely reported in reputable outlets. The narrative provides specific details, such as the planned halt to quantitative tightening by December 1, 2025, and the potential for a 50 basis-point rate cut, which are supported by recent reports. The language and tone are consistent with typical financial reporting, and there are no signs of excessive or off-topic detail unrelated to the claim. The tone is appropriately cautious and analytical, reflecting the complex nature of monetary policy decisions.
Overall assessment
Verdict (FAIL, OPEN, PASS): PASS
Confidence (LOW, MEDIUM, HIGH): HIGH
Summary:
The narrative is a timely and accurate synthesis of recent reports from reputable sources, with no significant discrepancies or signs of disinformation. The quotes are accurately reported, and the information is consistent with known facts. The source reliability is high, and the plausibility of the claims is well-supported by recent developments.