There's been a lot of talk lately about a "hawkish" rate cut about to be promoted by the Federal Reserve's FOMC on Wednesday and this has left markets - stocks, bonds, and commodities - a little bit confused. While the widely-expected 25 basis point slash to the federal funds target rate is, in isolation, dovish, rhetoric from the Fed governors, regional presidents, and Chairman Powell himself may lean slightly to the rational side that believes inflation is still not fully under control nor is the base economy in dire enough straits to automatically assume the Fed's path is toward further easing.
Chairman Powell is likely to touch on these topics at his post-policy press conference and his points may be well-grounded, though, in the absence or delays of the usual government reports isn't going to clarify matters for the Fed's position one way or another. For instance, November PPI has now been delayed for release until January 14, the government shutdown being blamed for the delay by the bean-counters at the BLS.
Investopedia has published a list of reports that have already been delayed with the new release dates and some that have yet to be rescheduled. The somewhat long list itself is now five days old; some of the dates have been changed, again; and the lack of data implies that the Fed is "flying blind" no matter which way their economic bias trends. The lack of data also provides a potential escape hatch for any miscalculations the Fed might encounter. It wouldn't surprise anybody to hear strained apologies from Fed officials in February or March about higher prices, or low employment, or any number of economic pitfalls that may occur before, during, or after January 31, when the funding approved to end the shutdown three weeks ago runs out again.
There's every possibility that the government will shut down again, as the core issue of extending or rescinding health insurance tax credits remains unresolved with congressional holidays soon to commence. Both houses will be on holiday from December 20 through January 4. It's true that the people most responsible for the government shutdown, and lack of, or delayed, data releases are the 535 members of congress who seem unable to agree on anything beyond support for Ukraine and their own salaries. As a whole, the Senators and Representatives have been largely mute when it comes to resolving core issues and they're nowhere near consensus or compromise on the main stumbling block.
In the meantime, many Americans face a December 15 deadline to choose an insurance provider. Congress has once again left them in the lurch, without a clear decision. Many Americans may choose to opt out of choosing altogether. Premiums and deductibles on the available plans remain sky-high and congress has forwarded no guidance going forward. It's almost as if the shutdown, ostensibly forced by Democrats opposed to the cancellation of Obamacare subsidies (by Republicans in the One Big Beautiful Bill) was all for naught and the country will be forced back into indecision and shutdown again by February 1.
Inaction at the congressional level provides the Federal Reserve plenty of cover for whatever monetary policies they prefer to promote. "Don't blame us, it was them," is likely to be the phrase rising up the unaccountability chart with a bullet in early 2026 as the economy suffers, people are forced into buying things - health insurance - they don't want or can’t afford, and the media spin gyrates out of control.
What the FOMC will accomplish on Wednesday, in association with Jerome Powell and others' jawboning immediately afterwards, has all the elements of a bait-and-switch. The Fed will cut the target rate down to 3.50-3.75%, that's a given, but the talk will be about further rate cuts, in January and beyond, which the fed mouthpieces are certain to downplay. In other words, after this cut, no more, and maybe not for a long time, so you'll get some relief, but there's no guarantee we will do more of the same. In essence, the Fed is cutting rates rather reluctantly while implying that there will be a rough road ahead and they'll be standing back and watching instead of acting.
As the Wednesday 2:00 pm ET date with destiny approaches, markets remain unresolved and taking bites of reality into account. Stocks turned lower on Monday, and stock futures are heading lower across the board this morning. Actions of the Federal Reserve don't occur in a vacuum. There are more issues surrounding the economy of the U.S. and the rest of the world to consider. The unwinding of the Yen carry trade is becoming a hot-button issue, the AI spending spree is coming under considerable scrutiny as are most government policies. Reality rears its ugly head again and more people are paying attention, noticing that government and media characterizations of the state of affairs doesn't quite jibe with what they're experiencing on a day-to-day basis.
A Santa Rally may be in the offing come bonus time, but there's a good chance it will occur at levels well below what's current.
After what looks to be a "hawkish rate cut" might the next move on the markets be one of Orwellian design, like "stocks rally lower?"
At the Close, Monday, December 8, 2025:
Dow: 47,739.32, -215.67 (-0.45%)
NASDAQ: 23,545.90, -32.22 (-0.14%)
S&P 500: 6,846.51, -23.89 (-0.35%)
NYSE Composite: 21,703.20, -106.88 (-0.49%)
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