Powell’s Term Ends in 2026, Putting Fed Independence in Focus

Posted on December 11, 2025 by Ignacio Teson

Once interest-rate cuts are decided, the U.S. Federal Reserve will face a series of challenges next year.

The Federal Reserve is heading into a period that will severely test its independence and governance, amid mounting legal and political pressures. On Tuesday, December 9, the central bank begins a two-day meeting to decide on an interest-rate cut—one of the most closely watched issues of recent months.

That decision will set the stage for a turbulent 2026, marked by the arrival of a new Fed chair—appointed by U.S. President Donald Trump—and the reshaping of the institution’s leadership structure. Several unresolved issues are expected to amplify the divisions already visible throughout this year’s meeting schedule and policy debates.

The challenges the Fed will face in 2026

A new chair

Fed Chair Jerome Powell’s term expires in May, and attention is focused on the name Trump will put forward as his successor. At the top of the short list is Kevin Hassett, one of his key economic advisers, among others. The nomination process will conclude with Senate confirmation, likely in time for the new chair to preside over the Federal Open Market Committee’s June meeting. The Senate Banking Committee will hold a hearing to evaluate the nominee, followed by a full Senate vote.

Powell enjoyed bipartisan support in both of his confirmation votes—an 84–13 approval when Trump promoted him in 2018, and an 80–19 vote in 2022 when he was reappointed by former President Joe Biden.

The next chair, however, is expected to face a much tighter vote, given the administration’s clear intent to exert influence over the Fed. Trump’s most recent nominee to the Fed Board of Governors, Stephen Miran, was confirmed by a razor-thin 48–47 margin, with four Republicans absent.

Power structure

The Fed’s structure is multilayered: a seven-member Board of Governors—appointed by the president and confirmed by the Senate—oversees the system; twelve regional reserve bank presidents manage their own staff and supervisory responsibilities; and the Federal Open Market Committee (FOMC) sets interest rates, consisting of the governors and five rotating reserve bank presidents.

Rate decisions have exposed rifts across these groups as differing views clash over the economic data. Midterm elections will determine which party controls Congress for the remainder of Trump’s term, and that control will shape how quickly—or slowly—the Fed can reach consensus, depending on lawmakers’ economic outlooks.

The Board wields influence far beyond rate policy: it can rewrite central bank communication rules, set budgets and staffing levels for regional banks, and shape how the largest financial institutions are regulated. But major changes require a Board majority, which may limit Trump’s ambitions—he will have appointed only three of the seven seats.

It is also unclear when the next Board seat will become available for the administration to fill. While Powell’s chairmanship ends in May, his Board term runs until 2028, the final full year of Trump’s presidency. If he follows precedent, Powell may step down from the Board in May, but he could choose to remain. The same uncertainty applies to current Vice Chair Philip Jefferson, whose vice chair term ends in September 2027 but whose Board seat—appointed by Biden—extends to 2036.

Mexico Follows U.S. Lead, Approves Tariffs of Up to 50% on Chinese Goods

Posted on December 11, 2025 by Ignacio Teson

The measure, promoted by Claudia Sheinbaum, aims to protect Mexico’s domestic industry and mirrors Donald Trump’s trade policy toward China. It will take effect in January 2026 and will apply to more than 1,400 products.

Mexico’s Senate approved the tariff package on Asian imports on Wednesday, marking a protectionist shift in the country’s trade policy. The legislation imposes duties ranging from 5% to 50% on more than 1,400 products from Asian countries without a trade agreement with Mexico—most notably China.

The new tariffs will take effect in January 2026 and will hit key sectors such as textiles, metals, and auto parts. Although President Claudia Sheinbaum has publicly denied any coordination with Washington, the move closely mirrors U.S. President Donald Trump’s approach in his trade standoff with China.

The timing also appears far from coincidental: the vote took place amid intense trade negotiations with the White House, fueling expectations that Mexico could secure relief from U.S. tariffs on steel and aluminum.

According to the Finance Ministry, the new tariffs are expected to generate an additional US$2.8 billion next year.

Lobbying and international pressure

The initiative, introduced by Sheinbaum in early September, faced pushback from Asian governments, business chambers, and opposition lawmakers, delaying its passage through Congress.

Following the announcement, China’s Ministry of Commerce issued a sharp response on Thursday, saying it would closely monitor Mexico’s tariff regime and assess its impact. Beijing called the measure “unjustified and harmful.”

“China has always opposed any form of unilateral tariff hikes and hopes Mexico will correct such unilateral and protectionist practices as soon as possible,” the statement said, warning that the measures will “substantially undermine” commercial interests.

The auto sector in the spotlight

Chinese vehicles will face the highest tariff: 50%. The figure is particularly relevant given that automakers from the Asian giant now hold 20% of Mexico’s car market—an exponential rise from the marginal foothold they had just six years ago.

The decision has the backing of Mexican officials and industry associations seeking to shield the country’s auto manufacturing base, a pillar of its industrial sector.

The move also aligns with broader regional trends: Canada adopted similar measures last year on Chinese electric vehicles, steel, and aluminum, echoing Washington’s trade stance.

Sheinbaum’s strategy aims to curb the growing practice of “transshipment” of Chinese exports through third countries—a concern shared by the United States under the U.S.–Mexico–Canada Agreement.

Mexican Peso Ends Slightly Higher Against the Dollar After Fed Rate Cut

Posted on December 10, 2025 by Ignacio Teson

The U.S. central bank cut rates for the third consecutive time, in line with market expectations. The dollar weakened after the announcement.

The Mexican peso posted a marginal gain against the dollar in midweek trading. The local currency advanced after the Federal Reserve delivered a widely expected 25-basis-point rate cut in its final policy meeting of the year.

The exchange rate closed the session at 18.1824 pesos per dollar. Compared with yesterday’s official Banxico close of 18.1919, the peso gained 0.05%, roughly one cent.

During the day, the dollar traded between a high of 18.2298 and a low of 18.1701 pesos. The Dollar Index (DXY), which tracks the greenback against six major currencies, weakened 0.62% to 98.62 points.

[[USD/MXN-graph]]

Fed cuts rates

U.S. Treasury yields extended their losses—pulling the dollar down—after the Fed cut interest rates by 25 basis points, matching expectations. It was the third straight reduction of that size.

The Fed’s new economic projections showed policymakers expect only one quarter-point cut in 2026, the same outlook as in September. Three officials dissented.

After the decision, U.S. President Donald Trump said the rate cut was “too small” and argued it could have been larger. The Republican leader has repeatedly criticized Fed Chair Jerome Powell.

In his post-meeting remarks, Powell focused on concerns about cutting rates while inflation remains above target. He noted that price pressures remain elevated partly due to Trump’s tariffs.

Mexico raises tariffs on China

On the domestic front, Mexico’s Chamber of Deputies approved a plan earlier in the day to raise tariffs by up to 50% next year on thousands of imported products from China and other Asian countries. The goal is to strengthen domestic production and address trade imbalances.

The proposal—which still needs Senate approval—would raise or impose new tariffs throughout 2026 on imports of autos, auto parts, textiles, clothing, plastics, and steel from China, India, South Korea, and others.

In the coming days, the peso is expected to trade within a range of 18.15–18.25 per dollar. The main risk remains political: tariff threats, diplomatic tensions, and issues surrounding the USMCA.

Fed Delivers Third Rate Cut, Sticks to One Cut in 2026

Posted on December 10, 2025 by Ignacio Teson

Dissent again surfaced inside the Federal Reserve’s inner circle. With only three meetings left under Jerome Powell’s leadership, uncertainty over the Fed’s future independence is gaining traction.

The Federal Reserve ultimately cut rates to a 3.5%–3.75% range, ending the year with three consecutive reductions. Looking ahead, economic projections showed a notable improvement compared with September’s outlook. Still, questions remain: Chair Jerome Powell will step down in May 2026, and the leading candidate to replace him, Kevin Hassett, is openly advocating for aggressive rate cuts.

In its official statement, the Federal Open Market Committee (FOMC) — the Fed body responsible for rate decisions — argued that “available indicators suggest that economic activity has expanded at a moderate pace,” while “job growth has slowed this year and the unemployment rate has increased slightly through September.”

[[EUR/USD-graph]]

Growing dissent within the Fed’s core decision-making group is becoming a focal point for markets. Three FOMC members opposed the latest cut. Stephen Miran — one of Donald Trump’s closest allies inside the Fed — pushed for a 50-basis-point cut, while Austan Goolsbee and Jeffrey R. Schmid preferred to keep rates unchanged.

Economic projections improve

In their new forecasts, Fed officials expect one additional rate cut in 2026 and another in 2027. However, views remain divided: seven officials favored keeping rates steady throughout 2026, while eight supported at least two cuts.

Markets welcomed the improved economic outlook. The FOMC now expects GDP to grow 1.7%, up from the 1.6% projection in September. For next year, the upgrade is even larger: 2.3% growth, up from 1.8%.

Inflation is projected at 2.9% this year, easing to 2.4% in 2026 and 2.1% in 2027. This marks a significant shift from three months ago, when the Fed expected inflation of 3% in 2025 and 2.6% in 2026.

As for unemployment, the forecast remains unchanged at 4.5%, a level the Fed views as the upper limit compatible with its dual mandate of stable prices and maximum employment.

EU–Mercosur Deal: Expectations Surge Ahead of the Signing

Posted on December 10, 2025 by Ignacio Teson

The final word before the official announcement now lies with the European Council. After days of tension, the meeting is finally set to move forward.

The European Central Bank. — The European Union will sign the Mercosur deal soon.

When it looked as if the Mercosur summit would once again collapse due to internal disagreements, diplomatic efforts managed to unlock the impasse. With Paraguay—initially the most resistant member—now on board, and with Javier Milei’s government signalling approval, Brazil pushed ahead with preparations for the presidential meeting scheduled for December 20 in Foz do Iguaçu. There, the long-delayed Mercosur–European Union agreement, strongly championed by Luiz Inácio Lula da Silva, could finally be signed.

The event is already listed in Mercosur’s official channels; all that remains is the formal announcement, pending the European Council’s decision on Tuesday the 16th. If the vote goes through, the signing could take place on the spot.

A dispute over dates—and an unexpected turn

The controversy began when Brazil’s Foreign Ministry rescheduled the summit from December 2 to December 20, convinced the EU would not have enough time to approve the text by the earlier date.

Paraguay reacted immediately, sending an official note to Brazil’s Mercosur coordinator, Gisela Padovan, declaring it would not attend.

Argentina, which also preferred the original date, supported the complaint—though it has consistently backed moving forward with the deal for months. This clash added to the already tense political distance between Milei and Lula da Silva, which persists despite ongoing diplomatic contacts.

Lula insists: “The signing will happen on the 20th”

Rather than back down, the Brazilian president doubled down publicly, insisting the pact must be signed on December 20. He acknowledged “problems” with Paraguay, governed by Santiago Peña, a political ally of Donald Trump—like Argentina’s Milei. As a workaround, Lula suggested signing the agreement with the EU on the 20th and holding the Mercosur presidential summit later, on January 14 in Brasília.

“I will do it in Brasília. I will do it in Brasília because we likely have a problem with Paraguay, which cannot join on the 20th. We may set the Mercosur meeting for early January and sign on December 20,” he stated.

Those comments triggered a new round of negotiations, which ultimately confirmed both the date and the venue.

Quiet diplomacy that brought positions closer

Argentine foreign minister Pablo Quirno held a key meeting with his Paraguayan counterpart Rubén Ramírez, where conversations were revived to secure Paraguay’s presence and advance the agenda proposed by Lula.

Likewise, relations between Argentina and Paraguay have grown increasingly coordinated. Not coincidentally, Peña and Milei traveled together to Oslo.

The decisive signal will come from Europe

Two governments—France and Poland—have already signaled their opposition. Another key player, Italy, is still weighing its position. Although relations between Giorgia Meloni and Milei are positive, Rome is unwilling to support the agreement without stronger guarantees for its agricultural sector.

IMF Raises China’s Growth Outlook but Warns on Need for Structural Reforms

Posted on December 10, 2025 by Ignacio Teson

The IMF urged the Asian giant to shift toward a consumption-driven growth model.

The International Monetary Fund (IMF) called on China to accelerate structural reforms and move toward a consumption-led growth model that reins in debt-driven investment and exports.

However, the institution made no direct mention of former President Trump or the tariff war between the world’s second-largest economy and the United States. China, meanwhile, posted a record $1 trillion trade surplus for the first time, and is expected to account for up to 40% of global growth in 2025.

In its periodic review, the IMF raised its 2025 growth forecast for China to 5.0% from 4.8%, and now expects 4.5% growth in 2026, up from 4.2%.

At the same time, it warned that China’s weak property sector, heavily indebted local governments, and sluggish domestic demand remain major obstacles the economy must overcome to sustain growth. Beijing is watching the IMF’s “Article IV” review closely, as an endorsement—or criticism—of its economic management could ease or heighten tensions with key trading partners.

The IMF’s assessment of China’s economy

“China’s large economic footprint and rising global trade tensions make export-dependence a less viable strategy for sustaining robust growth,” the IMF said. “The main policy priority for China is to transition to a consumption-driven growth model, moving away from excessive reliance on exports and investment.”

“This transition will require more urgent and forceful macroeconomic support, reforms to reduce households’ high savings rate, and a scaling back of inefficient investment and unwarranted industrial-policy support,” the global lender added.

Mexican Peso Jumps Ahead of Key Fed Decision

Posted on December 9, 2025 by Ignacio Teson

Traders expect the U.S. central bank to announce a rate cut tomorrow at the conclusion of its meeting. In Mexico, November inflation data is keeping bets alive for a Banxico cut as well.

The Mexican peso inched higher against the dollar in Tuesday’s session. The local currency strengthened despite a volatile trading day, as markets prepared for the Federal Reserve’s final monetary policy decision of the year.

The exchange rate closed at 18.1919 pesos per dollar. Compared with yesterday’s official Banxico close of 18.2559, the peso gained 6.40 centavos, or 0.35%.

The dollar traded within a range of 18.3105 to 18.1713 pesos. The Dollar Index (DXY), which tracks the greenback against six major currencies, was up 0.11% at 99.23 points.

[[USD/MXN-graph]]

Fed expectations

The Fed will announce its final rate decision of the year on Wednesday. According to the FedWatch tool, which tracks federal funds futures pricing, traders assign an 87.4% probability to a 25-basis-point cut.

On the data front, U.S. job openings, as reported by the JOLTs survey, rose slightly in October, though hiring remained subdued—strengthening the argument for further easing.

Kevin Hassett, White House economic adviser and the frontrunner to become the next Fed Chair, said Tuesday there is “ample room” for additional rate cuts but noted that rising inflation could change the calculus.

Mexico inflation ticks higher

Mexico’s headline inflation rose more than expected in November, with core inflation also coming in above forecasts. The surprise increase injected caution into market expectations, though investors still anticipate a Banxico rate cut next week.

Stubborn core inflation remains a concern despite weak economic momentum. Banxico said in its latest statement that it will “consider lowering the rate.” Even so, markets widely expect only one more cut—for now.

Wall Street Ends Mixed Ahead of Fed’s Interest Rate Decision

Posted on December 9, 2025 by Ignacio Teson

U.S. private payrolls increased by 4,750 jobs, which could dampen expectations for another rate cut in 2026.

Wall Street’s main indexes ended mixed on Tuesday as the Federal Reserve kicked off its two-day monetary policy meeting, which is widely expected to conclude on Wednesday with the third interest-rate cut of the year.

The Dow Jones Industrial Average fell 0.4% to 47,560.81, the S&P 500 slipped 0.1% to 6,839.51, while the Nasdaq Composite edged up 0.1% to 23,576.49.

[[SPX-graph]]

Is the rate cut a done deal?

According to CME FedWatch, the probability of a rate cut now stands at about 89%.

However, with several policymakers recently voicing concerns about delivering a third cut since September—particularly at a time when economic data has been limited due to a record-long government shutdown—this could become one of the Fed’s most contentious decisions in years.

There are also high expectations for an “aggressive cut” in Wednesday night’s FOMC decision.

Fresh labor data could temper expectations for further easing

Tuesday’s data suggests the FOMC may try to curb expectations of additional cuts in the coming year. U.S. private payrolls increased by an average of 4,750 jobs per week over the four weeks ending November 22, according to ADP’s weekly update to its monthly National Employment Report.

Job openings also ticked up slightly in October, rising by 12,000, according to the Bureau of Labor Statistics (BLS).

The BLS will release its delayed November nonfarm payrolls report—a key indicator—on December 16. October’s unemployment rate will never be formally published due to the shutdown but was last estimated near a four-year high of 4.4% in September.

Stocks in focus and notable earnings

Much of the day’s attention centered on Nvidia (-0.3%) after President Donald Trump announced on Truth Social that he will allow the company to sell its H200 AI chips to authorized clients in China and other countries, though subject to a 25% tariff and safeguards to protect U.S. national security.

Trump said he had informed Chinese President Xi Jinping of the decision, which Xi reportedly welcomed. Nvidia’s H200, introduced in 2023 as the successor to the H100, is estimated to be roughly six times more powerful than the H20—the most advanced AI chip Nvidia is currently allowed to sell to China.

Energy stocks outperformed, led by Exxon Mobil, which rose 1.9% after raising its earnings and cash-flow outlook for 2024–2030.

AutoZone fell 7.2% after reporting quarterly results that missed analysts’ expectations.

Gold Keeps Shining: Markets Bet on Bigger Gains in 2026

Posted on December 9, 2025 by Ignacio Teson

The yellow metal has spent the year smashing records. It has outperformed nearly every other asset in 2025, and while it’s true that trees don’t grow to the sky, forecasts suggest gold still has room to climb.

Gold’s Resilience Deepens as Rate-Cut Bets and Geopolitics Shape Outlook

As the year draws to a close, gold has already broken more than 50 records on global markets. The troy ounce is trading above $4,200 on New York’s Comex, delivering a 60% year-to-date return and becoming the most profitable asset of the year. Major investment banks—Goldman Sachs, J.P. Morgan, Deutsche Bank, and others—whether by momentum, FOMO, or simple herd behavior, continue to project fresh highs for gold in 2026 and beyond.

Forecasts range from a modest $4,500 to more than $6,000 per ounce, and some even imagine levels as high as $20,000 by the end of the decade, tied to a potential collapse of fiat currencies as we know them. While many variables could influence gold’s path, experts across the global metals market agree: the rally isn’t over.

[[XAU/USD-graph]]

Demand remains strong—not only from ETFs and retail investors, but also from central banks, which keep announcing new gold-reserve purchase programs across every continent. China has long led the push, but now countries across Europe, Asia, Latin America, and Africa are joining in. No one wants to miss the wave, even with prices at levels that might typically deter new buying. In this context, the World Gold Council’s projection of a 5–15% rise looks fairly conservative.

A remarkable year for gold

Gold’s performance in 2025 has been extraordinary, marking what could become the metal’s fourth-best annual return since 1971. The surge was driven by geopolitical and economic uncertainty, a weaker dollar, and strong price momentum. This environment boosted portfolio diversification as bonds delivered lackluster returns and investors grew uneasy about overheated stock markets.

Both private investors and central banks increased their exposure to gold as a source of stability—across every region, from West to East.

What to expect in 2026

Looking ahead, markets largely expect the status quo to hold, but diverging macroeconomic data—complicated by geopolitical tension—means uncertainty will remain elevated. Concerns are rising over a cooling U.S. labor market, and debates continue over whether inflation will remain sticky or face renewed upward pressure. Meanwhile, geopolitical frictions remain unresolved.

What does this mean for gold? As in 2025, unexpected “tail-risk” events are impossible to forecast, yet their frequency is rising—adding fuel to gold’s safe-haven appeal.

The consensus view: steady support with room to rise

Gold’s current price already reflects the broad macroeconomic consensus on growth, inflation, and monetary policy.

That consensus includes:

Global GDP growth stable and near trend (2.7%–2.8% real)
Another 75 bps of Fed rate cuts expected
Inflation falling 40–60 bps by year-end

A slightly stronger dollar and relatively stable bond yields

U.S. data remain mixed, but market participants fear the momentum is slowing. As risk appetite wanes, investors shift toward defensive assets. A potential reset in AI-driven market expectations could further weigh on equities—especially given AI stocks’ heavy influence on major indexes—amplifying volatility and encouraging de-risking.

This could weaken the U.S. labor market as record-high profit margins compress, dragging down consumer activity and contributing to slower global growth. In this scenario, the Fed may be forced to cut interest rates more aggressively than currently projected, easing monetary policy in response to heightened uncertainty and softening inflation expectations.

Gold, once again, could be a primary beneficiary.

Bitcoin Surges to $94,000, Hitting a Three-Week High

Posted on December 9, 2025 by Ignacio Teson

The leaders of the U.S. central bank will set the course for the world’s largest cryptocurrency, which has gained 17% since hitting a low of $80,843 on November 21.

Bitcoin is up for today along with the stock market.

The cryptocurrency market is trading higher on Tuesday. Bitcoin (BTC) is up 4.5% to $94,245, according to Binance, and still hasn’t found stability since the start of December. Ethereum (ETH) is also rising, up 8.8% to $3,390.55.

Altcoins are mostly in the green as well. Lido Staked Ether (STETH) leads with an 8.7% jump, followed by Solana (SOL) with 6.1%, Ripple (XRP) with 4.4%, and BNB with 3.2%.

[[BTC/USD-graph]]

Trump and the Fed to shape Bitcoin’s outlook

In recent weeks, speculation has intensified around the U.S. Federal Reserve’s next move on interest rates. The Fed’s two-day meeting begins this Tuesday, December 9.

After a series of lukewarm economic data releases, the probability of a 25-basis-point rate cut has climbed to 89%. Still, the crypto market is trading cautiously, as the outlook remains uncertain until the meeting concludes.

At the same time, actions taken by U.S. President Donald Trump will also influence the direction of the leading cryptocurrency. Beyond the rate-cut decision itself, if the White House signals a more crypto-friendly stance, concerns over aggressive regulation would diminish, potentially encouraging funds and institutions to warm up to the sector.

Bitcoin’s trajectory will ultimately depend on several factors. The Fed’s interpretation of labor-market data, among other indicators, may determine whether policymakers feel pressure to cut soon—or not at all. The first scenario is generally supportive of risk assets like Bitcoin, though it also raises the specter of recession, which could spook investors.

Experts warn that the $86,000 level is a key support; falling below it could push prices down toward $80,000.