The Fed Faces a High-Stakes Tradeoff
Last week, the U.S. Federal Reserve found itself in a situation that felt a lot like a round of“Would You Rather?”— the classic game built around choosing the lesser of two imperfect options.
In the game, players are asked to weigh uncomfortable alternatives. For example:
Would you rather run on your hands or write with your feet?
Eat chocolate-flavored broccoli or broccoli-flavored chocolate?
See 10 minutes into the future or 150 years ahead?
In many ways, this mirrors the Federal Reserve’s core challenge. The Fed operates under two primary mandates: promoting maximum employment and maintaining stable prices. At its most recent meeting, members of the Federal Open Market Committee (FOMC) had to decide which threat posed a greater risk to the economy — a labor market that is cooling or inflation that remains elevated.
If inflation was viewed as the larger concern, holding rates steady or even raising them would help keep prices in check. If weakening employment was seen as the bigger risk, holding rates steady or cutting them could help support job growth.
Complicating the decision, policymakers were working without updated economic data from October and November, which isn’t expected until mid-December, according to reporting from Barron’s.
Ultimately, the FOMC opted to cut the federal funds rate by 0.25 percentage points. The decision, however, was far from unanimous. Two members believed rates should remain unchanged, while another argued the cut should have been larger, according to Bloomberg.
The disagreement extended beyond the voting members. The Fed’s quarterly projections showed that six non-FOMC policymakers expected the benchmark federal funds rate to end 2025 in the 3.75% to 4% range — where it stood prior to the latest cut — signaling opposition to the move.
Since September 2025, the FOMC has reduced rates by 0.75%. Since September 2024, total cuts amount to 1.75%.
Markets reacted cautiously. The S&P 500 and Nasdaq Composite finished the week lower following a broad Friday sell-off, attributed by Barron’s to uncertainty surrounding artificial intelligence. The Dow Jones Industrial Average ended the week higher, while long-term U.S. Treasury yields were steady or edged upward.
Data as of 12/12/25 | 1-Week | Y-T-D | 1-Year | 3-Year | 5-Year | 10-Year |
Standard & Poor’s 500 Index | -0.6% | 16.1% | 12.8% | 19.6% | 13.4% | 12.9% |
Dow Jones Global ex-U.S. Index | 0.7 | 26.7 | 22.5 | 13.4 | 5.3 | 6.0 |
10-year Treasury Note (yield only) | 4.2 | N/A | 4.3 | 3.6 | 0.9 | 2.2 |
Gold (per ounce) | 2.0 | 63.9 | 59.8 | 34.2 | 18.8 | 15.1 |
Bloomberg Commodity Index | -2.7 | 10.3 | 10.0 | -1.1 | 7.7 | 3.4 |
S&P 500, Dow Jones Global ex-US, Gold, and Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested in directly. N/A means not applicable.
Why Are Health Care Costs Weighing So Heavily on Americans?
Beyond interest rates and market moves, another issue continues to strain households and employers alike: the rising cost of health care.
Employer health benefit costs are increasing faster than both wages and inflation, according to Mercer. Data from the Bureau of Labor Statistics shows that, year over year through September 2025:
Employer health insurance costs rose 6.1%
Wages and salaries increased 3.5%
Inflation climbed 2.8%
Mercer’s National Survey of Employer-Sponsored Health Plans found that the average cost of employer-provided health insurance reached $17,496 per employee in 2025. Costs are projected to rise another 6.7% in 2026, pushing the average above $18,500 per employee.
In most employer-sponsored plans, these rising costs are shared with employees through paycheck deductions and plan designs that shift more out-of-pocket responsibility to plan members. Because employee contributions tend to rise alongside total costs, concerns about health care affordability are intensifying.
A Kaiser Family Foundation poll conducted last summer reinforces this reality. Among insured Americans ages 18 to 64, 42% said paying for health care was somewhat or very difficult. Among uninsured Americans in the same age group, that figure jumped to 82%.
Medical expenses remain a leading cause of personal bankruptcy in the United States. Unexpected or ongoing health issues can quickly drain financial resources — even for those who carry insurance. With more than 90% of Americans covered through private or government programs, the persistence of medical bankruptcy remains deeply concerning.
If you have questions about health insurance or want help navigating your options, reach out. We may be able to help clarify what’s available and what makes sense for your situation.
Weekly Focus – Think About It
“Sustained inflation can undermine the foundations of economic growth.”
— Janet Yellen