Stock Markets: A Last-Minute Fed Shock from FOMC Meeting Minutes?
Stock Markets: A Last-Minute Fed Shock from FOMC Meeting Minutes?
By:Ilya Spivak
Stock markets may wobble if December FOMC meeting minutes jolt sentiment in thin year-end trade.
- Wall Street faces last-minute event risk in December FOMC meeting minutes
- Lead-up jobs, inflation, and GDP data have produced mixed results for markets
- Thin year-end trading might amplify volatility of traders are left disappointed
Stock markets may be facing a last-minute shock courtesy of the Federal Reserve in the waning days of 2025 as the central bank releases minutes from December’s meeting of the rate-setting Federal Open Market Committee (FOMC). Signs of resistance to ongoing interest rate cuts may sour traders’ mood ahead of the new year.
The markets were broadly displeased with this month’s Fed’s policy update. Officials delivered a 25-basis-point (bps) rate cut as widely expected but their signaling for 2026 left traders wanting. Updated forecasts showed FOMC members still saw just one more cut in the year ahead, whereas the markets have priced in at least two of them.
Markets were disappointed with the Fed’s outing in December
Fed Chair Jerome Powell signaled that policymakers were split on how to proceed amid equally balanced risks to the central bank’s “maximum employment” and “price stability” mandates, leaving them in wait-and-see mode. With rates plausibly close to neutral, Powell suggested that the committee is well-placed to take a back seat for a while.
The creation of a new program of short-term Treasury purchases alongside the rate cut offered a pleasant whiff of stimulus on first blush, leaving traders to weigh conflicting cues for the better part of 48 hours after the FOMC announcement. When they finally reached resolution, a steep selloff on Wall Street signaled they’d settled on disappointment.
From there, catch-up releases of US jobs and inflation data produced mixed results, although both seemed supportive of taking rates lower. Hiring came out weaker and price growth cooled more than economists anticipated. Stocks jeered the former outcome then rebounded after the second one while the priced-in policy outlook idled in place.
December FOMC minutes might jolt stock markets as 2025 winds sown
Traders were seemingly of two minds again when third-quarter gross domestic product (GDP) data followed. The result proved to be sharply stronger than consensus forecasts envisioned. That such strength might limit scope for rate cuts weighed on markets briefly but selling pressure fizzled with Christmas market closures in view.
As it stands, the probability of an interest rate cut at the Fed’s January meeting has fallen to a meager 16%, while the path ahead in 2026 as it is implied in benchmark Fed Funds futures continues to surpass the median FOMC guesstimate by at least one 25bps reduction.
If December’s Minutes document hints that a majority of FOMC members are prepared to wait for evidence from timelier data before committing one way or another, thin year-end liquidity and soggy sentiment may come together for an eleventh-hour selloff before the book is closed on 2025.
Ilya Spivak, tastylive head of global macro, has over 15 years of experience in trading strategy, and he specializes in identifying thematic moves in currencies, commodities, interest rates and equities. He hosts Macro Money and co-hosts Overtime, Monday-Thursday. @Ilyaspivak
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