Federal Reserve Tone Decoder

Speaker: Jerome H. Powell | Date: December 10, 2025 | Source: 1

• Labour Market: ✓ — Labor market appears gradually cooling with job gains slowing, unemployment edging up to 4.4%, and downside risks rising; AI is contributing to job cuts (1).
• Inflation Concern: ✗ — Inflation remains somewhat elevated at 2.8% PCE, with upside risks persisting due to tariff pass-through, though longer-term expectations remain anchored to 2% (1).
• Policy Bias: Easing — Policy rate lowered by 1/4 percentage point; initiated purchases of shorter-term Treasury securities to maintain ample reserves, effectively ending quantitative tightening (1).
• Risk Asymmetry: ✓ — Downside risks to employment are elevated, while upside risks to inflation are noted; the Committee emphasizes a balanced approach given these tensions (1).
• Internal Divergence: ✗ — Dissenting votes from one member preferring a larger 1/2 percentage point cut and two members preferring no change, indicating mixed views on policy direction (2).

TONE: DOVISH — Committee cut rates by 25bps and signaled the end of QT, prioritizing employment downside risks despite elevated inflation, although dissents were mixed.

Speaker: FOMC Participants | Date: December 10, 2025 | Source: 3

• Labour Market: ✓ — Median unemployment rate at 4.5% for 2025 with downside risks to employment rising; job gains have slowed (3)(4).
• Inflation Concern: ✓ — Median PCE inflation for 2025 projected at 2.9%, with near-term inflation expectations declining from earlier peaks; overall inflation remains somewhat elevated (3)(4).
• Policy Bias: Easing — Median federal funds rate for 2025 projects further easing to 3.6%, reflecting the current 25bps cut and the initiation of shorter-term Treasury purchases to maintain ample reserves (3)(4).
• Risk Asymmetry: ✓ — Uncertainty about the economic outlook remains elevated, with explicit judgment that downside risks to employment rose in recent months (3)(4).
• Internal Divergence: ✗ — One participant preferred a larger 1/2 percentage point reduction, while two others preferred no change to the target range (2).

TONE: DOVISH — Projections reflect continued easing with a focus on mitigating employment downside risks, despite ongoing inflation concerns.

Speaker: FOMC | Date: December 10, 2025 | Source: 2

• Labour Market: ✓ — Job gains have slowed this year, and the unemployment rate has edged up but remains low; downside risks to employment rose in recent months (2).
• Inflation Concern: ✗ — Inflation has moved up since earlier in the year and remains somewhat elevated (2).
• Policy Bias: Easing — Target range for the federal funds rate lowered by 1/4 percentage point to 3-1/2 to 3-3/4 percent; committee decided to initiate purchases of shorter-term Treasury securities to maintain an ample supply of reserves (2).
• Risk Asymmetry: ✓ — Uncertainty elevated; attentive to risks on both sides, but judges downside risks to employment rose (2).
• Internal Divergence: ✗ — Stephen I. Miran preferred a 1/2 percentage point cut; Austan D. Goolsbee and Jeffrey R. Schmid preferred no change (2).

TONE: DOVISH — Policy rate cut by 25bps and a shift to actively manage reserves to ample levels, driven by rising employment downside risks.

Speaker: Federal Reserve System | Date: November 2025 | Source: 16

• Labour Market: ✓ — Employment declined slightly, with weaker labor demand across half of Districts; increased layoff announcements and shifts to hiring freezes were noted; AI replaced some entry-level positions (16).
• Inflation Concern: ✗ — Prices rose moderately due to widespread tariff-induced input cost pressures; firms reported financial strain from tariffs; expectations for upward cost pressures persist, but near-term price-raising plans are mixed (16).
• Policy Bias: Data-Dependent — No direct monetary policy discussion in this commentary.
• Risk Asymmetry: ✓ — Increased risk of slower activity and elevated economic uncertainty were noted by contacts (16).
• Internal Divergence: ✗ — Not applicable for this type of document.

TONE: NEUTRAL — Softening labor markets and economic uncertainty are balanced by persistent, tariff-driven inflation pressures.

Event: Rate Decision | Date: October 29, 2025

Policy Action: 25bps CUT

Context: A second consecutive rate cut, signaling increasing concern over downside employment risks and a desire to move policy towards a more neutral stance, amidst persistent but potentially temporary inflation from tariffs.

Speaker: Jerome H. Powell | Date: October 29, 2025 | Source: 1

• Labour Market: ✓ — Labor market cooling gradually with job gains slowing and downside risks rising; AI adoption and immigration policy changes contribute to softer demand and supply, though aggregate layoffs are not sharply increasing (1).
• Inflation Concern: ✗ — Inflation remains elevated (2.8% PCE in September); tariffs are pushing up goods prices, expected to persist into spring 2026; upside risks to inflation are still noted (1).
• Policy Bias: Easing — Policy rate lowered by 1/4 percentage point; decision made to conclude balance sheet reduction (QT) on December 1st; future rate cuts are "not a foregone conclusion" (1).
• Risk Asymmetry: ✓ — Balance of risks has shifted to employment downside, while inflation risks remain tilted to the upside; Committee faces a challenging situation with "two-sided risks" (1).
• Internal Divergence: ✗ — Committee had "strongly differing views" for December; two members dissented on the current cut (one favored larger cut, one no change) (12).

TONE: DOVISH — Rate cut and end of QT reflect heightened concern for employment downside risks, despite sticky inflation and diverse committee views on future policy.

Speaker: FOMC | Date: October 29, 2025 | Source: 12

• Labour Market: ✓ — Job gains have slowed, unemployment rate edged up but remains low; downside risks to employment rose in recent months (12).
• Inflation Concern: ✗ — Inflation has moved up since earlier in the year and remains somewhat elevated (12).
• Policy Bias: Easing — Target range for the federal funds rate lowered by 1/4 percentage point to 3-3/4 to 4 percent; decision to conclude reduction of aggregate securities holdings on December 1 (12).
• Risk Asymmetry: ✓ — Uncertainty about economic outlook remains elevated; attentive to both sides of dual mandate, judges downside risks to employment rose (12).
• Internal Divergence: ✗ — Stephen I. Miran preferred a 1/2 percentage point cut; Jeffrey R. Schmid preferred no change (12).

TONE: DOVISH — 25bps rate cut and ending of balance sheet runoff underscore a primary focus on increased downside risks to employment.

Speaker: FOMC | Date: October 28-29, 2025 | Source: 13

• Labour Market: ✓ — Labor market conditions had softened, with job gains slowing and unemployment rate edging up; downside risks to employment had increased significantly (1).
• Inflation Concern: ✗ — Total and core PCE inflation were 2.8% in September, remaining elevated; tariff effects continued to put upward pressure; upside risks to inflation outlook were still elevated (1).
• Policy Bias: Easing — Committee lowered the federal funds rate by 1/4 percentage point; agreed to conclude balance sheet runoff on December 1st; mixed views on further easing in December (1).
• Risk Asymmetry: ✓ — Downside risks to employment and GDP forecasts were skewed, while inflation risks were skewed to the upside; primary emphasis on rising employment downside risks (1).
• Internal Divergence: ✗ — Two members dissented on the rate cut; one preferred a 1/2 percentage point reduction (dovish), another preferred no change (hawkish) (1).

TONE: DOVISH — The rate cut and end of QT reflect a shift in the balance of risks towards employment concerns, despite continued elevated inflation and mixed internal views on future policy.

Speaker: Federal Reserve System | Date: October 2025 | Source: 16

• Labour Market: ✓ — Employment levels stable but labor demand muted; increasing layoffs/attrition and AI investment reduced headcounts; labor availability improved but strained in some sectors; wages grew modestly, with intensified labor cost pressures from health insurance (16).
• Inflation Concern: ✗ — Prices rose further due to higher import, services, and tariff-induced costs; mixed pass-through to consumers; some price declines in specific materials; concerns about price acceleration in 2026 (16).
• Policy Bias: Data-Dependent — No direct monetary policy discussion in this commentary.
• Risk Asymmetry: ✓ — Elevated economic uncertainty and downside risk to growth from potential government shutdown highlighted (16).
• Internal Divergence: ✗ — Not applicable for this type of document.

TONE: NEUTRAL — Mixed economic signals with muted labor demand and rising inflation pressures, alongside elevated uncertainty.

Event: Rate Decision | Date: September 17, 2025

Policy Action: 25bps CUT

Context: First rate cut in a series, driven by a noted shift in the balance of risks towards increased downside risks to employment and a softening labor market, even as inflation remains elevated.

Speaker: Jerome H. Powell | Date: September 17, 2025 | Source: 1

• Labour Market: ✓ — Unemployment rate edged up to 4.3%, job gains slowed significantly to 29,000/month; downside risks to employment have risen; labor market softening and less dynamic (1).
• Inflation Concern: ✗ — Inflation has risen recently and remains somewhat elevated; total PCE at 2.7%, core PCE at 2.9% in August; tariffs pushing up goods prices; near-term inflation expectations moved up; upside risks to inflation noted (1).
• Policy Bias: Easing — Policy interest rate lowered by 1/4 percentage point; Committee will continue to reduce securities holdings; moving towards a more neutral policy stance; future easing expected over the year (1).
• Risk Asymmetry: ✓ — Risks to inflation tilted to the upside, while risks to employment tilted to the downside; balance of risks has shifted towards employment concerns (1).
• Internal Divergence: ✓ — One participant preferred a 1/2 percentage point reduction, indicating a dovish dissent (9).

TONE: DOVISH — 25bps rate cut in response to softening labor market and increased downside risks to employment, despite persistent inflation pressures and some dovish dissent for a larger cut.

Speaker: FOMC Participants | Date: September 17, 2025 | Source: 8

• Labour Market: ✓ — Median unemployment rate projection for 2025 increased to 4.5% (from 4.4% in June); risks to unemployment rate were weighted to the downside (8)(7).
• Inflation Concern: ✗ — Median PCE inflation for 2025 remained at 3.0%, with core PCE at 3.1%, indicating inflation is elevated and risks are skewed to the upside (8)(7).
• Policy Bias: Easing — Median federal funds rate projection for 2025 decreased to 3.6% (from 3.9% in June), reflecting expected rate cuts (8)(7).
• Risk Asymmetry: ✓ — Risks to employment and the labor market judged to have become more tilted to the downside, while inflation risks were skewed to the upside (8)(7).
• Internal Divergence: ✓ — One member voted against the policy action, preferring a 1/2 percentage point reduction in the federal funds rate (9).

TONE: DOVISH — Projections signal a dovish shift, with lower interest rate expectations and increased concern for downside employment risks, despite elevated inflation outlook.

Speaker: FOMC | Date: September 17, 2025 | Source: 9

• Labour Market: ✓ — Job gains have slowed, and the unemployment rate has edged up but remains low; downside risks to employment have risen (9).
• Inflation Concern: ✗ — Inflation has moved up and remains somewhat elevated (9).
• Policy Bias: Easing — Target range for the federal funds rate lowered by 1/4 percentage point to 4 to 4-1/4 percent; Committee will continue reducing securities holdings (9).
• Risk Asymmetry: ✓ — Uncertainty about the economic outlook remains elevated; attentive to risks on both sides, but judges downside risks to employment have risen (9).
• Internal Divergence: ✓ — Stephen I. Miran voted against the action, preferring a 1/2 percentage point cut (9).

TONE: DOVISH — The 25bps rate cut is a direct response to rising employment downside risks, despite persistent elevated inflation; a dovish dissent for a larger cut was noted.

Speaker: FOMC | Date: September 16-17, 2025 | Source: 11

• Labour Market: ✓ — Downside risks to the labor market increased due to weaker July and August employment reports; unemployment rate edged up to 4.3%; overall softening in conditions (1).
• Inflation Concern: ✗ — PCE inflation (2.7%) and core PCE (2.9%) in August were at the upper end of ranges; tariffs expected to add upward pressure in 2026; risks to inflation forecast skewed to the upside (1).
• Policy Bias: Easing — Almost all participants expected a 25bps cut at this meeting and future easing this year; continued reduction of securities holdings was agreed upon (1).
• Risk Asymmetry: ✓ — Downside risks to employment tilted, upside risks to inflation skewed; a "balanced approach" to dual mandate was stressed (1).
• Internal Divergence: ✓ — One member voted against, preferring a 1/2 percentage point reduction in the target range (1).

TONE: DOVISH — Committee initiated rate cuts, focusing on increasing downside risks to employment, despite persistent inflation concerns, with some advocating for a larger cut.

Speaker: FOMC | Date: August 22, 2025 | Source: 5

• Labour Market: ✓ — Reaffirms commitment to maximum employment, allowing for employment to run above real-time assessments without necessarily creating price stability risks (4).
• Inflation Concern: ⚪ — Reaffirms 2 percent inflation target (PCE); committed to acting forcefully to ensure longer-term inflation expectations remain well anchored (4).
• Policy Bias: Data-Dependent — Monetary policy decisions reflect longer-run goals, medium-term outlook, and balance of risks; balanced approach when objectives are not complementary (4).
• Risk Asymmetry: ⚪ — Considers balance of risks, including financial system risks; employs a balanced approach if employment and inflation objectives conflict (4).
• Internal Divergence: ✗ — Not applicable as this is a strategic statement, not a meeting specific policy decision.

TONE: NEUTRAL — Reaffirms dual mandate with emphasis on flexible average inflation targeting and maximum employment, without indicating immediate policy shifts.