The Federal Reserve and the FOMC

The Federal Open Market Committee is the monetary policy-making body of the Federal Reserve (the Fed), the central bank of the United States. The FOMC meets eight times per year in Washington DC, with each meeting lasting one or two days. The committee consists of 12 voting members: the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven Reserve Bank presidents who rotate voting rights annually.

The Fed operates under a dual mandate established by Congress: maximum employment and price stability, with price stability defined as headline PCE inflation of 2% over the longer run. When the FOMC sets the federal funds rate, it directly influences short-term borrowing costs across the entire US economy, flowing through to mortgage rates, corporate borrowing, consumer credit, and exchange rates. The December 2026 meeting is particularly significant because it concludes the committee’s work for the year and establishes the rate outlook through its updated SEP and dot plot, which will guide market expectations into 2027.

FOMC December Meeting: December 8-9, 2026

The December 2026 meeting is one of four SEP meetings in the year (alongside March, June, and September), at which FOMC members publish quarterly forecasts for GDP growth, unemployment, inflation, and the federal funds rate. The dot plot, which shows each member’s year-end rate expectation for the next three years and the longer run, is the primary tool through which the committee communicates its collective thinking on the rate path.

The March 2026 SEP, the most recent set of projections available at the time of writing, showed committee members expecting just one rate cut in 2026 and one in 2027, before the federal funds rate converges towards a longer-run neutral rate of approximately 3%. Against this backdrop, the key question for December 2026 is whether the full-year data has shifted those projections. The combination of elevated headline inflation (driven by energy prices following geopolitical tensions in the Middle East), above-trend employment growth in early 2026, and below-trend GDP growth presents a complex policy environment. The decision will be announced at 2:00 p.m. EDT on December 9, with Fed Chair Jerome Powell’s press conference beginning at 2:30 p.m. EDT.

What to Expect

The most likely outcome at the December 2026 meeting, based on the FOMC’s stated data-dependent posture and the March 2026 dot plot projections, is a hold at the current 3.50% to 3.75% range. The Fed has held rates through multiple consecutive meetings in 2026, citing elevated inflation and a resilient labour market as arguments against premature easing. However, if core PCE inflation has moderated consistently through the second half of 2026, and if GDP growth has slowed to a pace that raises concerns about economic momentum, the December SEP could reveal a shift in committee thinking towards more cuts in 2027.

Governor Miran’s dissent at the April 2026 meeting, calling for a 25-basis-point cut, represented the dovish extreme of the committee. Meanwhile, hawkish members dissenting in favour of stronger forward guidance against cuts have pushed the other end. The December meeting will reveal where this internal debate has resolved over the course of 2026. If the committee delivers a cut at any earlier meeting (June, July, September, or October), December could either follow with a second cut or revert to a hold.

Rate Decision History

Sources: Federal Reserve; CNBC; J.P. Morgan. “n/v” = vote not yet verified from official sources. Upper rate refers to the upper bound of the federal funds target range. Rates shown at 3.75% upper bound reflect the hold from December 2025 onwards.

Market Impact Scenarios

• Hold (base case) – Maintaining the 3.50% to 3.75% range would be interpreted as cautious, data-dependent policy continuation. Markets will focus primarily on the updated dot plot for 2027 expectations. If the dot plot shifts towards more cuts in 2027, Treasury yields would fall modestly and equities would rally. If the dot plot holds or moves hawkish, bond yields would remain elevated, and equities would face pressure heading into year-end.
• Cut (25bp) – A December rate cut to 3.25%-3.50% would signal the Fed has gained enough confidence in the inflation outlook to resume easing. This outcome would be positive for equities and bonds, negative for the dollar, and would likely be accompanied by a dovish dot plot. The size of the year-end equity rally would depend on whether the cut was already priced in by December.
• Hike – A rate increase from the current range would represent a dramatic policy reversal and is not the base case. A hike would be strongly negative for equities, particularly for the most rate-sensitive sectors (real estate, utilities, high-growth technology), and would strengthen the dollar while pushing bond yields higher across all maturities.

Press Conference and Forward Guidance

Fed Chair Jerome Powell’s press conference at 2:30 p.m. EDT on December 9 will be scrutinised for signals about the 2027 rate path. After the dot plot, Powell’s characterisation of inflation progress and the growth outlook will drive market reaction. Key phrases to watch include whether the Fed describes inflation as “still elevated” versus “making progress toward 2%”, and whether Powell signals that the committee sees further cuts as appropriate or that it will remain on hold for an extended period.

The December SEP will also update projections for PCE inflation, core PCE, GDP growth, and unemployment through 2028. Revisions to these projections, particularly whether the committee now sees inflation returning to 2% in 2027 or later, will shape the market’s interpretation of the dot plot and inform investment positioning into the new year. The December meeting traditionally attracts higher media and market attention than non-SEP meetings.

Related Events

• FOMC Rate Decision June 2026 – The June 16-17 SEP meeting is the next FOMC rate decision after the current date, providing the first updated dot plot ahead of December.
• US CPI Report June 2026 – Inflation data from June and subsequent months will be the primary determinant of whether the Fed has scope to cut in December 2026.
• ECB Rate Decision June 2026 – The ECB’s June 11 decision illustrates the broader global monetary policy environment against which the Fed’s December decision will be assessed.

Frequently Asked Questions

What is the FOMC’s dual mandate?

The Federal Open Market Committee operates under a congressional mandate to pursue maximum employment and price stability. In practice, the Fed targets headline PCE inflation of 2% over the longer run and aims to maintain the unemployment rate near its longer-run neutral level, which the March 2026 SEP estimated at approximately 4.1%.

When will the FOMC December 2026 decision be announced?

The FOMC will release its policy statement at 2:00 p.m. EDT on Wednesday, December 9, 2026. Fed Chair Jerome Powell’s press conference will begin at 2:30 p.m. EDT. The Summary of Economic Projections (SEP), including the dot plot, will be released simultaneously with the policy statement.

What does the dot plot show?

The dot plot is a chart published at each SEP meeting showing each FOMC member’s expectation for the appropriate level of the federal funds rate at year-end for the next three years and in the longer run. It is anonymous and shows the distribution of views across the committee, not a binding forecast. Markets use the median dot to infer the committee’s collective rate path, but it can shift significantly between meetings as economic conditions change.