Podcast Summary: The Exchange – "Final Fed Decision of the Year 12/10/25"

Date: December 10, 2025
Host: Kelly Evans (CNBC)
Key Guests: Tom Lee (Fundstrat), Barry Knapp (Ironsides Macro), Jason Furman (Harvard Kennedy School), Low Tony (Plexo Capital), Jonathan Gray (Blackstone), Claudia Sahm (New Century Advisors)

Episode Overview

This episode of CNBC’s "The Exchange" focuses on the Federal Reserve’s highly anticipated final policy decision of 2025. With markets awaiting a possible third consecutive rate cut, top analysts, economists, and market participants weigh in on what’s at stake: how many more cuts to expect, the implications of the Fed’s evolving policy language, and the interplay between interest rates, quantitative policy, fiscal dynamics, and the ongoing AI investment boom. The episode features in-depth, sometimes sharply contrasting, views on the direction of central banking, market reactions, and broader economic health.

Key Discussion Points and Insights

1. The Fed's Expected Decision and Market Positioning

(00:49–03:46)

• Steve Liesman (CNBC): Recaps the big day — markets are 90% pricing in a quarter-point cut, but not much after that until at least June, as a new Fed Chair is expected to take office.
  • He notes the unusual macro environment: "Rising bond market yields, unusual for a time when the Fed is cutting… The outlook could change sharply… not just with the statement and with the Powell press conference, but in seven days when we get all that data." (01:38)
• Debate on pausing the cut: Liesman says the Fed considered waiting for more economic data, but thought it might make them look “data-dependent” in a bad way. “I think they decided that they would not look good if they were waiting on one piece of data.” (03:15)

2. Panel: Market Reactions, Fed “Hawkishness”, and the Balance Sheet

With Tom Lee (Fundstrat) & Barry Knapp (Ironsides Macro) | 04:19–16:00

Tom Lee (More in line with consensus)

• Expects a hawkish cut: “Fed does a cut, but future cuts are uncertain, not even maybe until June.” (04:19)
• Markets are braced for this already, so any dovish shift could actually be bullish: "The market's now adjusted to the idea that the Fed is institutionally slightly hawkish...which is why it could be a surprise." (06:01, 06:13)
• On market impact: Compares the dynamic to Apple issuing cautious guidance—markets price in downside risk, but recover quickly.

Barry Knapp (More dovish, with caveats)

• Focuses on the Fed’s balance sheet and technical market workings: “For three years you and I have been talking about the Fed eased primarily using their balance sheet, but tightened using only one of three channels… they're just draining reserves from the system. That's the plumbing issue.” (07:11)
• Asserts the crucial transition is to foster private sector holding of government debt—calls for deregulation so banks can absorb more. "It's crucial in the long run that a price sensitive buyer owns the government debt, not a price insensitive buyer." (08:15)
• On yield curve inversion: “Their policy rate has been overly restrictive for floating rate borrowers... crucial that they allow that duration to return to the wild... but lower that short term rate.” (09:37)
• Dismisses imminent QE restart: “They're not going to restart QE. If I'm right about deregulating the banking sector, that'll be totally unnecessary.” (10:18, 10:27)

Crypto & Risk Assets Angle

• Tom Lee: "In the crypto world, QT was draining liquidity. So the ending of QT is essentially QE..." (11:10)
• Crypto and small caps could be major winners if the Fed tilts dovish and the ISM (manufacturing index) enters expansion: “The ISM moving back above 50 has historically been associated with… super cycle moves in bitcoin and ethereum.” (12:28)

Inflation, Balances, and Asset Prices

• Barry Knapp: Argues inflation came mainly from fiscal/asset purchases, not rate cuts: "Government spending and Fed purchases of assets... drove house prices up 46% in 18 months..." (13:31)
• Wants higher long-term rates (to “lean against the AI bubble” and curtail speculative excess) but lower short-term rates. (15:07)

3. Contrarian View: Jason Furman on Why the Fed Shouldn’t Cut

(18:17–24:39)

• Position: “I think the Fed is wrong in its decision. Inflation and I partly agree [with Barry Knapp]: The inflation was largely fiscal in 2021 and 2022. But... we’re continuing to run a large budget deficit. It’s actually going up...so the Fed needs to do now what it...was way too slow to do in 2021.” (18:59)
• Emphasizes the ongoing demand excess from fiscal policy and surging asset prices: “As long as we're doing expansionary fiscal policy at the same time that we have enormously expansionary financial conditions coming from the huge run up in asset prices. That just means the system is awash in demand.” (20:04)
• Suggests the only real path to sustainably lower rates is for fiscal authorities to act: “If you want to have lower rates, the government's going to have to lower its budget deficit.” (20:04)
• On inflation control: “The Fed is the only game in town once again, because no one else is doing their job and playing their part.” (22:20)
• Notes the awkward economic sentiment: “Terrible consumer sentiment even while gas is below $3 a barrel...” (20:42)
• On AI and productivity: “My hope is [the AI boom] starts to show up on the supply side in terms of higher productivity. And if that happens, it will make some of these choices less painful...” (23:21)

4. Private Markets & AI Capex: The VC & Investor Perspective

Low Tony, Plexo Capital | 28:48–32:20

• Praises the Fed for awareness of balance sheet issues and the interplay with private markets: “What we've seen now is that the private companies are really driving a lot of what happens in the public markets.” (29:28)
• Notes the massive AI infrastructure buildout: “We likely need about $3 trillion in infrastructure to be built over the next five years. And about half of that is going to need to come from the debt markets.” (30:17)
• On the AI bubble question: Sees real value in AI’s technological development, but warns, “We do need to get our arms around this new dynamic where we’re requiring massive amounts of infrastructure to be built out.” (30:46)
• Disappointing IPO performance, but selected companies (like Reddit, CoreWeave) are bright spots.

5. Top Asset Manager View: Jonathan Gray (Blackstone)

(32:55–41:45)

• Describes a “pretty good macro environment,” especially for AI-related businesses, but notes softness in the lower- and middle-income consumer. “Where we see a little bit of weakness is on the consumer side... The labor market has softened a bit.” (33:14)
• On rates: “The softening of the labor market... will help them cut rates. I'd also say... housing front... much lower inflation there as well.” (33:14)
• On the impact for liquidity and credit: “The key thing for what we do in private credit is can we deliver a premium return relative to liquid markets?... bringing those investors right up to borrowers.” (35:56)
• Dismisses noise around private credit blowups: “It's all about the noise. The facts on the ground remained incredibly good. The business produced strong performance again in October.” (37:19)
• On AI and infrastructure: Sees a “sea change” with investment in data centers and power justified by enormous anticipated productivity gains. “It's a huge mistake to underestimate what's coming... [AI] is going to lead to this productivity revolution.” (39:04)

6. Labor Market Anxiety & The “Insurance Cut”

Claudia Sahm, New Century Advisors | 42:19–46:11

• Supports today’s cut as a prudent insurance move: “We don't see [labor market deterioration] right now, but we've seen a lot of slowing in job creation. The unemployment rate has moved up for three consecutive months... exactly the kind of dynamic we do not want to see keep going...” (43:02)
• Says the “downside risk to employment are more substantial than the upside risk to inflation...They're both there. This is a tough call. But… it's on the employment side where things are more worrisome and they have the ability to take another cut.” (43:33)
• On QE/balance sheet: Predicts asset purchases will restart early next year to “maintain enough liquidity,” but emphasizes nuance: “They won’t frame it as quantitative easing… more just like keeping enough liquidity in the system.” (44:16)
• Warns against aggressively cutting without pause: “For each rate cut that the Fed goes through, it does raise the bar for the next cut...as the Fed is cutting, it's removing restriction." (46:10)

Memorable Quotes & Notable Moments

• Steve Liesman: “There isn’t really another cut confidently priced in until June. What happens then? Well, Powell’s successor will take office.” (01:41)
• Tom Lee: “The market’s now adjusted to the idea that the Fed is institutionally slightly hawkish...there could be undue pressure coming from outside the Fed, and the institution wants to protect its integrity and that comes across as hawkish.” (06:13)
• Barry Knapp: “It’s crucial in the long run that a price sensitive buyer owns the government debt, not a price insensitive buyer.” (08:15)
• Jason Furman: “If you want to have lower rates, the government's going to have to lower its budget deficit...The Fed is the only game in town once again, because no one else is doing their job and playing their part.” (20:04, 22:20)
• Low Tony: “Private companies are really driving a lot of what happens in the public markets. As an investor, we need to understand all the dynamics… We likely need about $3 trillion in infrastructure to be built over the next five years.” (29:28, 30:17)
• Jonathan Gray: “It’s a huge mistake to underestimate what’s coming… We’re bringing super intelligence at scale, at super low cost, to consumers and businesses.” (39:04)
• Claudia Sahm: “The risk of a deterioration in the labor market… it is more and more clear that a weakening demand for labor is what's taking over. And... we're just, and again, the unemployment rate rising is another sign that demand is winning in terms of that demand supply. And you want the Fed to be reacting to that.” (43:02, 44:27)

Important Segment Timestamps

• 00:49: Kelly Evans opens – sets the stakes for the Fed's final meeting, outlines the roster of guests.
• 01:41: Steve Liesman with Washington update, focus on the rate cut outlook and Fed Chair succession.
• 04:19: Tom Lee (Fundstrat) and Barry Knapp (Ironsides Macro) panel – options for market reaction, balance sheet talk.
• 11:10: Discussion on crypto, QT/QE, and implications for liquidity.
• 13:31: Barry Knapp's recap of fiscal stimulus and its role in 2021–22 inflation.
• 18:17: Jason Furman challenges the need for a cut, emphasizes fiscal irresponsibility and inflation risks.
• 28:48: Low Tony (Plexo Capital) gives the VC viewpoint on the AI build-out and Fed policy crosswinds.
• 32:55: Blackstone’s Jonathan Gray assesses macro conditions, labor, AI, rates, and investing in a new paradigm.
• 42:19: Claudia Sahm explains and supports the case for an “insurance” rate cut due to labor market fragility.

Thematic Takeaways

• No Unanimity on the Rate Cut: Guests are sharply divided between “insurance” cut advocates, those worried about inflation/fiscal excess, and those focused on liquidity plumbing.
• Technical Factors and the Plumbing: Ongoing arguments about the interaction of rates, quantitative policy, and how the Fed’s plumbing affects market function.
• AI Capex and Bubbles: The unprecedented scale of AI-related investments is changing both public and private markets. Even amid boom, caution about overbuild and credit market stress is pervasive.
• Labor Market & Risks: Consensus is that while growth is strong in some sectors (AI-driven productivity), there’s notable weakness in the consumer and labor market that merits careful monitoring.
• Fed’s Dilemma: Balancing inflation control, risk management, and supporting a still-uncertain labor market creates a “no easy answer” setup.

For Listeners Who Missed the Episode

This episode is a must-listen for anyone trying to understand why today’s Fed decision is so contentious—and so consequential—not just for the markets but for the real economy and future Fed policy itself. From the hawkish “higher for longer” camp to those fearing unseen cracks in employment or market liquidity, the conversation captures both Wall Street’s caution and the unpredictable cross-currents of fiscal stimulus, global demand, and emerging technologies.

The consensus? The only thing certain is heightened uncertainty as the Fed heads into 2026, with a new Chair, a shifting labor market, and a financial system being reshaped by the AI boom and the aftermath of historic fiscal expansion.