Key takeaways from the FOMC Minutes for the December 9-10, 2025 meeting:

• The FOMC cut the fed funds target range -25 bps to 3.50% to 3.75% in December, reflecting elevated inflation but rising downside labor risks.

• Investors generally expected a -25 bp cut at the December meeting, with the Desk survey modal outlook and options pricing implying two additional rate cuts next year, while macro outlooks were little changed over the intermeeting period.

• Treasury yields edged higher but stayed within recent ranges, while inflation compensation moved lower, especially at shorter tenors, which the Desk manager attributed to lower energy prices and some reassessment of near-term tariff inflation effects.

• Money market conditions tightened as repo rates stayed elevated and volatile, the EFFR spread to IORB faced upward pressure, and standing repo operations saw higher frequency and volume, consistent with reserves having declined into the ample range.

• The manager flagged seasonal liability swings that could drive large reserve declines, especially around mid to late April via TGA tax inflows, and recommended starting reserve management purchases (RMPs) soon, with Desk survey respondents expecting about $220B in net purchases over the first 12 months on average.

• Participants judged it appropriate to begin RMPs and to initiate purchases of shorter-term Treasuries, with many preferring Treasury bills to shift SOMA composition toward the Treasury universe, while emphasizing that RMPs are for rate control and market functioning rather than the policy stance.

• The Committee voted to remove the aggregate limit on standing repo operations and directed the Desk to increase SOMA holdings via Treasury bill purchases and, if needed, other Treasuries with maturities of 3 years or less to maintain ample reserves.

• Staff data through September showed total PCE inflation at 2.8% YoY and core PCE at 2.8% YoY, with core services inflation moving down but core goods inflation picking up, which staff largely attributed to higher tariffs.

• Labor market conditions were described as gradually cooling: unemployment ticked up to 4.4% in September, payroll gains slowed, hiring remained subdued, and participants judged labor market risks tilted to the downside amid limited recent government data.

• On the policy decision, nine members supported the -25 bp cut, while three dissented (two preferring no change and one preferring a -50 bp cut), with supporters citing increased downside employment risks and diminished or unchanged upside inflation risks, and opponents citing stalled progress toward 2% inflation and the value of additional incoming data.

• Participants broadly agreed inflation remained somewhat elevated and risks to inflation were still tilted to the upside, while also judging downside employment risks had increased, reinforcing the emphasis that policy is not on a preset course and will be guided by incoming data and risk balancing.

• Many participants "judged that the available evidence pointed to a reduced probability that tariffs would lead to persistent inflation pressures."