The Federal Reserve held the federal funds rate unchanged at 3.50%-3.75% after three consecutive cuts, reflecting a shift toward a wait-and-see policy stance as labor market conditions show early signs of stabilization and inflation remains somewhat elevated.

• The FOMC left the policy rate unchanged at 3.50%-3.75%, marking the first pause after three straight cuts totaling 75 bps, which signals a transition away from active easing as members reassess incoming data.

• The decision again included dissents from Stephen Miran and Christopher Waller, both preferring a -25 bp cut, highlighting lingering concern among some officials about continued labor market softening.

• Statement language on growth was upgraded from “moderate” to “solid,” while employment growth was described as having “remained low,” indicating stronger activity alongside still weak hiring momentum.

• The Fed shifted its unemployment phrasing from having “moved up” to “showing some signs of stabilization,” suggesting policymakers no longer view labor market deterioration as intensifying.

• The Committee removed language stating that downside risks to employment had risen in recent months, reinforcing the view that labor conditions have moved into a more balanced phase.

• Inflation language was left unchanged, with CPI and PCE data continuing to show modest disinflation but still elevated levels, as core PCE held near 2.8% YoY in November, broadly in line with its trend since Q1 2025.

• Powell reiterated that much of the recent inflation overshoot reflects tariff driven goods price increases, while services inflation continues to cool, supporting the baseline view of gradual disinflation over time.