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This week’s focus shifts firmly back to U.S. monetary policy after a pivotal Fed meeting that delivered both the expected 25 bps rate cut and a surprisingly divided committee outlook. At the same time, markets interpreted the decision as more dovish than the dot plot suggests: the dollar sank to multi-month lows, risk assets rallied globally, and Fed balance-sheet expansion is set to return via $40B in monthly T-bill purchases, an underappreciated shift that helps maintain liquidity conditions into year-end.

Here’s what we’ll cover today:

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After cutting rates by 25 basis points, the Fed’s latest projections show just one additional cut in 2026 and another in 2027, placing the federal funds rate near 3% by the end of 2027. The real story, however, is the dispersion: four officials expect no cuts next year, and seven policymakers in total see zero or one cut. This level of divergence highlights a significantly fractured committee. For investors, the message is straightforward, predictable quarterly cuts are gone. Any future easing will be gradual, highly data-dependent, and increasingly uncertain. That puts enormous weight on the delayed November jobs and inflation reports, now scheduled for December 16 and 18 following the government shutdown.

The dollar’s reaction reflected the market’s dovish interpretation almost immediately. The Bloomberg Dollar Spot Index sank to its lowest level since mid-October, sliding toward the 1,209 support level and falling about 0.6% on Wednesday alone as traders unwound bullish USD exposure. The index is now down nearly 8% year-to-date and extended its decline through Thursday after softer jobless claims reinforced expectations for more easing than the Fed is signaling. This pullback is providing broad tailwinds, making commodities more affordable globally, improving risk appetite, and supporting emerging-market inflows, all while suggesting markets suspect the Fed’s cautious posture may ultimately prove too restrictive.

Global equities delivered a clear verdict as well: bullish. Stocks rallied sharply across the board after the decision. The MSCI All Country World Index broke to new all-time highs above 1,017, the S&P 500 closed just shy of its October record after rising 0.7%, the Dow added 497 points (1%), and the Russell 2000 pushed to a fresh all-time high. Investors are looking past the hawkish dot plot and focusing on what truly matters: Powell ruling out rate hikes, two market-implied cuts for 2026 despite the Fed projecting only one, and a globally synchronized easing cycle that continues to build momentum.

The Fed’s announcement that it will begin purchasing $40 billion in Treasury bills starting December 12 is more important than it seems at first glance. While not traditional quantitative easing aimed at long-term rates, these T-bill purchases are designed to restore “ample reserves” in the banking system after balances fell from $4.27 trillion in 2021 to roughly $2.83 trillion today. The Fed expects purchases to remain elevated for a few months before scaling back materially, and the move follows the official end of quantitative tightening in October. For markets accustomed to Fed liquidity support, the shift from balance-sheet runoff to balance-sheet expansion, technical or not, is a meaningful pivot that should keep financial conditions supportive and reduce the risk of any 2019-style funding stress.

The overall message is clear: the Fed has guided the economy into a soft landing and is now managing the transition with precision, even as internal disagreements suggest the road ahead won’t be perfectly smooth. With the dollar weakening, global equities breaking to new records, and Fed liquidity quietly returning, the broader environment continues to favor staying invested. Markets still expect two cuts in 2026, compared to the Fed’s conservative single-cut outlook, and Powell’s firm dismissal of rate hikes keeps the bias tilted toward easing. The key risk now lies in the delayed November data, those reports could be the catalyst that forces the Fed into a faster pace of cuts than it currently projects.

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