Fed Rates Dropping Again? Watch Out for the Hawkish Cut Effect
The Fed is predicted to cut rates by 25 bps in a hawkish cut scenario. Understand the impact on inflation and your investment portfolio in 2026.
Jakarta, Gotrade News - The Federal Reserve is most likely set to cut interest rates again by 25 basis points at this Wednesday's meeting. This strategic move will bring the benchmark rate down to the 3.5% - 3.75% range to keep the economy steady.
Keytakeaways
- The Fed is predicted to cut interest rates by 25 bps to 3.5%-3.75%.
- The "hawkish cut" concept signals a likely pause on future cuts.
- Inflation sticking at 2.8% is the main reason for the Fed's caution.
But this decision comes with some heated debate among the central bank officials about what to do next. As Loretta Mester explained in her interview with Yahoo Finance, this cut feels more pragmatic rather than based on a strong economic argument.
Why This “Hawkish” Signal is a Big Deal
This phenomenon is known as a "hawkish cut"—where the Fed lowers rates but gives a stern warning not to expect more easy money anytime soon. Economists from The Goldman Sachs Group, Inc. predict that the bar for any extra rate cuts is going to be much higher after this.
The main reason behind this cautious move is the labor market showing significant signs of cooling down. Luke Tilley from Wilmington Trust mentioned to Yahoo Finance that the drop in hiring numbers reflects a labor market that’s actually already pretty weak.
Even so, core inflation sticking at 2.8% is the main roadblock for the Fed to be too aggressive. Alan Blinder warned via Yahoo Finance that keeping on cutting rates right now risks making inflation even harder to control.
This uncertainty makes the 2026 economic projection a mixed bag and hard for market players to predict. Economists at Bank of America Corporation even project two more cuts next year purely because of the leadership change at the Fed.
Referensi:
- Yahoo Finance, The Fed is likely to cut rates for a third time this year. What happens next year is less certain. Accessed on December 10, 2025
- CNBC, The Fed decision is expected to feature a rate cut and a lot more. Here’s what to expect. Accessed on December 10, 2025
- Featured Image: Shutterstock
Disclaimer:
Gotrade is the trading name of Gotrade Securities Inc., registered with and supervised by the Labuan Financial Services Authority (LFSA). This content is for educational purposes only and does not constitute financial advice. Always do your own research (DYOR) before investing.
