The Federal Reserve is widely expected to cut rates by a quarter point at its Dec. 9–10 meeting, adding to recent easing aimed at cushioning a slowing labour market and above-target inflation. Investors await Chair Jerome Powell‘s tone — and the possibility of dissent — for clues that could sway stocks, bonds, and the dollar on Dec. 7, 2025. Either Powell will suggest further cuts or a pause, and whether a rare cluster of dissenting votes emerges, as these elements could send stocks, bonds and the dollar reeling, Dec. 7, 2025.
Economists surveyed this week anticipate the U.S. central bank will cut its benchmark rate by 0.25 percentage point, and a solid majority predict another split decision on the policy-setting Federal Open Market Committee, according to recent Reuters polling. Futures pricing, as tracked by CME Group’s FedWatch tool, implies the chance of a rate cut by the Fed at between 85 and 90 per cent — an indication of how thoroughly baked into financial markets expectations for the move have become.
Why this Fed interest rate cut is different
Beneath the headline odds, the data are a juggling act for Powell. The Fed’s preferred inflation measure, the personal consumption expenditures index, is at about 2.8 per cent compared with last year — above but cooling toward the target — and unemployment has risen to around 4.4 per cent amid a slowdown in consumer spending. For households and companies, another Fed cut would be a strong signal that the central bank is now more concerned with supporting growth than with wringing out any remaining vestiges of price pressure.
Investors have already seen the Fed change direction. It delivered its first interest rate cut in more than a decade in July 2019, an “insurance” cut noted in Bankrate’s summary of that meeting. And during the COVID-19 shock, policymakers cut rates to near zero in March 2020, according to the Brookings Institution. And in September 2024, a half-point cut signalled the beginning of the current easing cycle after one of the most aggressive tightening campaigns in decades, according to Reuters reporting on that decision.
What Powell says — rather than what the Fed does — could matter more.
Through the autumn, Powell has been telling everyone who will listen that policy is still “modestly restrictive,” even after two quarter-point cuts in recent months, and that officials are on high alert for the danger of inflation flaring again. At the news conference on Wednesday, investors will be parsing whether he characterizes this Fed rate cut as a part of a multi-meeting effort that could last until 2026 ‚ or ‘as basically one and done’ insurance,” analysts at JPMorgan Chase said in an Aug. A more hawkish tone could cause Treasury yields to rise and weigh on stocks, some of which are very expensive, even as short-term borrowing costs fall.
Dissents that could rattle markets
The stakes are especially high, given the possibility of a handful of dissenting votes. The quarter-point cut in October showed fissures but more among the ranks, with Kansas City Fed President Jeff Schmid and Fed Governor Stephen Miran dissenting — one against any action at all, the other wanting a deeper cut, according to an account of the meeting published on Reuters in October. Economists now anticipate Schmid dissenting again, and they consider it to be an even more serious possibility that St. Louis Fed President Albert Musalem will join him in opposing a cut, an unprecedented degree of public discord from a body that has long valued consensus.
If one or two officials don’t support the Fed rate cut this week, it’s that combination — a widely anticipated move, potentially hawkish guidance, visible dissent — that means the next few days could be more volatile than a spot cut by one-quarter of a percentage point appears at face value. move, potentially hawkish guidance, visible dissent — that means the next few days could be more volatile than a spot cut by one-quarter of a percentage point appears at face value.
