Mitsubishi UFJ: Fed's Policy in the Second Half of Next Year to Complicate Due to Leadership Changes

December 11 (FXStreet) – Mitsubishi UFJ Financial Group (MUFG) reported the Federal Reserve voted 9-3 to cut interest rates by 25 basis points, while acknowledging the U.S. labor market is gradually cooling. Fed Chair Jerome Powell also emphasized significant downside risks to the labor market. On inflation, the Fed noted goods inflation could peak in Q1 2026 if no new tariffs are imposed, though upside risks to inflation persistence remain. Powell signaled rate hikes are not the baseline expectation, with FOMC members split between holding rates steady and cutting them. The latest dot plot shows the Fed’s median expectation calls for just one rate cut in 2026 — a hawkish stance far more aggressive than market forecasts of ~55 basis points in cuts (or slightly more than two reductions). Powell added the Fed is currently in a “favorable position” to patiently monitor U.S. economic developments. Looking ahead, the policy outlook for the second half of next year may be complicated by potential changes in Fed leadership, adding uncertainty to markets.