Most Fed commentary that I see focuses on the federal funds rate, which is the interest rate at which banks trade federal funds overnight. The central bank cut rates for the third time by 0.25% on December 10. That brings the rate to between 3.5% to 3.75%, which is still relatively high when compared to the Eurozone and Japan. More importantly, at least in my view, is that the Fed has restarted Quantitative Easing (QE) bond purchases, although that isn't what they are calling it. The chart below shows how much the Fed has inserted itself into markets since the Great Recession.
According to Matt Grossman of The Wall Street Journal, "the renewed bond-buying isn’t intended as part of the Fed’s actions to steer the economy. Its goal is to minimize repo-market strains by bolstering banks’ access to reserves—a cash-like currency that banks keep on deposit at the Fed and can trade among themselves. If the Fed doesn’t add to its bondholdings over time, the supply of reserves gradually decreases and lags behind economic growth, squeezing repo markets and potentially pushing up interest rates out of alignment with the Fed’s goals."
Regardless of the intent, the initial purchase of $40 billion of bonds is stimulative to the economy and to markets and is expected to continue until sometime next year. Expect inflation to remain sticky and above what we had become accustomed to before the pandemic. In a word, fiscal and monetary policy are "accommodative."
* Grossman, M. "Fed to Resume Net Asset Purchases With $40 Billion in Securities This Month." The Wall Street Journal, Online, Dec. 10, 2025. https://www.wsj.com/economy/central-banking/fed-to-resume-net-asset-purchases-with-40-billion-in-securities-this-month-bdf55af0. Accessed on 12.23.2025.