Fed's December Rate Cut: A Comprehensive Analysis of Supporters and Opponents

Author: Deng Tong, Golden Finance

Original Title: Federal Reserve's December Rate Cut Decision: Who Supports It? Who Opposes It?

On November 21, according to CME's “FedWatch”: the probability of the Federal Reserve lowering interest rates by 25 basis points in December is 39.6%, while the probability of maintaining the current rate is 60.4%. On that day, Federal Reserve Vice Chairman and New York Fed President Williams stated that the Fed could lower rates “in the near future” without jeopardizing its inflation targets. As a result of these comments, the probability of “predicting the Fed will lower rates by 25 basis points in December rising to 61%” on Polymarket increased. Today, according to CME's “FedWatch” data: the probability of the Fed lowering rates by 25 basis points in December has risen to 69.4%, while the probability of maintaining the current rate is 30.6%.

Before Williams spoke, the price of BTC had been continuously falling, even reaching 82,000 dollars. After the interest rate cut comments were made, the price of BTC began to slowly rise, reaching 87,067.46 dollars at the time of publication.

White House economic advisor Hassett pointed out: the new leadership of the Federal Reserve may be expected to lower interest rates, and Trump may interview candidates for the Federal Reserve in the coming months. We may determine the candidate for the Federal Reserve Chair around the New Year. The market is currently paying close attention to the Federal Reserve's FOMC meeting.

I. The Voting Mechanism of the Federal Reserve FOMC Meeting

The decision-making of the Federal Open Market Committee (FOMC) of the Federal Reserve operates on a majority voting system, with each voting member having an equal vote. The committee consists of a total of 12 voting members, divided into two categories: permanent voting members and rotating voting members.

• All members of the council (up to seven people);
• President of the Federal Reserve Bank of New York;
• Among the remaining 11 central bank governors, 4 take turns serving for a term of one year.

The seven reserve bank presidents without voting rights will attend the Federal Open Market Committee meeting and participate in the discussions of the committee.

Voting Mechanism

• Majority Vote Decision: At the end of each two-day meeting, participants will vote on monetary policy proposals (for example, whether to adjust the target range for the federal funds rate), and proposals that receive a majority vote will be adopted.
• Consensus: Although there is a voting mechanism, FOMC members typically engage in extensive discussions and negotiations to seek consensus, ensuring that policy decisions have broad support and convey a consistent message to the market.
• Dissent Record: If a voting member disagrees with the final decision, their dissent will be formally recorded in the meeting minutes, demonstrating the diversity of opinions within the committee to the outside world.

LPL Financial Chief Economist Jeffrey Roach stated: “In fact, committee members communicate closely during breaks in meetings, striving to reach a consensus, but this does not guarantee that consensus will be achieved.”

Reaching a consensus among all members of the Federal Reserve helps convey a unified message from Fed officials regarding their actions to the market. However, if there are discrepancies in the voting results, it may raise questions about whether the Federal Reserve believes its actions are correct and about the motivations of its officials.

2. 2025 FOMC Voting Members and Their Biases

Permanent Voting Member ( Federal Reserve Board Member and President of the New York Fed )

Jerome H. Powell, Chairman ( Federal Reserve Board ): indecisive

On October 29, at a press conference following the Federal Reserve's decision to cut interest rates by 25 basis points, Powell stated that the rate cut may not necessarily last until December as previously widely predicted. “Further rate cuts in the December meeting are not a done deal, far from it. There are significant differences of opinion today. Hence, it is clear that we have not made a decision on the rate trajectory for December.” Powell acknowledged that the Fed is in a difficult position, with economic trends pulling monetary policy in opposite directions. “The situation we face now is that inflation has an upward risk, while employment has a downward risk. We only have one tool… you can't address both issues at the same time.”

John C. Williams, Vice Chairman ( President of the New York Fed ): favors rate cut

Williams stated at a meeting of the Central Bank of Chile that U.S. interest rates may decline without jeopardizing the Federal Reserve's inflation targets, while also helping to prevent a downturn in the labor market. “I think monetary policy is slightly tightening… therefore, I believe there is still room for further adjustments in the target range for the federal funds rate in the short term to bring the policy stance closer to neutral territory,” Williams said. He stated that the Federal Reserve needs to achieve its inflation targets “without taking excessive risks to the full employment objective.”

Michelle W. Bowman, Federal Reserve Governor: Leaning towards interest rate cuts

Bowman stated during a speech after the Federal Open Market Committee (FOMC) decided to cut interest rates for the first time since 2025 in September: “Now is the time for the Committee to take decisive and proactive action to address the declining vitality of the labor market and signs of fragility. We have likely fallen behind the situation in responding to the deteriorating labor market conditions.”

Stephen I. Miran, Federal Reserve Governor: Favoring interest rate cuts

Milan clearly supports a rate cut in December and believes it is “very appropriate.” He emphasized on November 15 that the data since September has been overall dovish, supporting the Federal Reserve's strengthening dovish stance. Earlier, he also suggested a 50 basis point cut and at least a 25 basis point cut. He believes that if economic data does not show significant changes, continuing to cut rates is a “consistent and reasonable choice.” Milan was appointed by Trump as the former chief economic advisor at the White House, and there are questions about his independence—his radical stance has exacerbated divisions within the Federal Reserve.

Christopher J. Waller, Federal Reserve Governor: Leaning towards rate cuts

On November 17, Waller stated that he supports a 0.25 percentage point reduction in the key interest rate in December to help boost the weak U.S. labor market—and he doubts he will change his mind. Waller indicated that based on surveys of consumers and businesses, as well as his own interactions with large employers, he is convinced that the labor market has deteriorated. He pointed out that due to the record 43-day government shutdown, key employment data that had been delayed is likely to show results that are contrary once released. “The labor market remains weak, close to stagnation.” Meanwhile, inflation has not risen significantly in recent months. He noted that the economic slowdown and high interest rates have suppressed consumer spending, which helps control inflation. “Given the signs of slowing economic growth and the weak labor market possibly leading to moderate wage growth, I don’t see any factors that would cause inflation to accelerate.”

Michael S. Barr, Federal Reserve Governor: Cautious Interest Rate Cuts

On November 20, Michael Barr stated: “I am concerned that the inflation rate is still around 3%, while our target is 2%. So we need to be cautious with monetary policy right now because we want to ensure that we achieve both aspects of our mission.”

Lisa D. Cook, Federal Reserve Governor: Indecisive

Cook stated during an interview with the Brookings Institution in Washington: “I determine my monetary policy stance at each meeting based on the latest data from various sources, changes in my expectations, and risk balance. Each meeting, including the one in December, is a live meeting.”

Philip N. Jefferson, Federal Reserve Board Member: Uncertain

On November 17, Jefferson pointed out: As the Federal Reserve eases its policy to a point that may halt progress in slowing inflation, it needs to “proceed slowly” on further rate cuts. “In recent months, I believe the balance of risks in the economy has shifted, with downside risks to employment increasing compared to the upside risks of inflation, and the upside risks of inflation may have recently diminished.” Jefferson will be guided by data and take a “meeting-by-meeting” approach to determine policy. “At this current point, this is an especially prudent approach.” Before the December Federal Reserve policy meeting, “how much official data we can see remains unclear.”

2025 Rotating Voting Members ( Regional Federal Reserve Presidents )

Susan M. Collins, President of the Boston Fed: Prefers not to cut interest rates

On November 12, Collins stated: Due to concerns about high inflation, she believes the threshold for further easing monetary policy in the near term is “relatively high.” “In the absence of clear evidence of a significant deterioration in the labor market, I would not easily ease policy, especially given that government shutdowns have limited inflation information. In the current environment of high uncertainty, it may be appropriate to maintain the policy rate at its current level for a period of time to balance inflation and employment risks.”

Alberto G. Musalem, President of the St. Louis Fed: Leans towards not lowering interest rates

On November 10, Musalem expressed clear skepticism about the prospects for further monetary easing. In a media interview, he stated, “We must proceed with caution at this moment, which is crucial. I believe that the space for further easing of policies is very limited without making the policies excessively accommodative.” Musalem believes that the current inflation rate is closer to 3%, rather than the Federal Reserve's target of 2%. He added that the financial environment, including stock valuations and housing prices, is at a high level; monetary policy is closer to neutral rather than lightly restrictive; and the labor market is also experiencing a measured cooling. “I believe we need to continue to take measures to curb inflation.”

Jeffrey R. Schmid, President of the Kansas City Federal Reserve: Leans towards not lowering interest rates.

On November 14, Schmid stated that the potential role of further interest rate cuts in strengthening high inflation would outweigh its support effects on the labor market: “I believe that further cuts will not play a significant role in mending the cracks in the labor market—these pressures are more likely to stem from structural changes in technology and immigration policy. However, rate cuts could have a more lasting impact on inflation, as they would increasingly raise doubts about our commitment to the 2% inflation target.” This reasoning is guiding his thoughts on the upcoming December Federal Reserve policy meeting, and he added that he remains open to new information in the coming weeks.

Austan D. Goolsbee, President of the Chicago Federal Reserve: Cautious Rate Cut

Goolsbee stated at an event of the Indianapolis Chartered Financial Analyst Association that the process of inflation rising back to 2% “seems to have stalled.” “This makes me a bit uneasy.”

In summary, among the 12 voters, four clearly lean towards a rate cut, while the other eight are either undecided or favor no rate cut.

3. Expectations for the Federal Reserve's interest rate cut in December

• Barclays research points out that there is still uncertainty regarding the Federal Reserve's interest rate decision next month, but Chairman Powell is likely to push the FOMC to make a rate cut decision. Based on recent speeches, Barclays believes that governors Mulan, Bowman, and Waller may support a rate cut, while regional Fed presidents Musalem and Schmied are inclined to maintain interest rates. Governors Barr and Jefferson, along with Goolsbee and Collins, have shown that their attitudes are not yet clear but are more inclined to maintain the status quo. Governors Cook and Williams rely on data but seem to support a rate cut more. Barclays stated: “This means that before considering Powell's position, there may be six voters inclined to keep rates unchanged and five inclined to cut rates.” The bank added that Powell will ultimately dominate this decision, as the threshold for governors to publicly oppose his position is very high.
• Citic Securities' research report states that New York Federal Reserve Chairman Williams hinted at a further rate cut in December. The market's expectations for a rate cut have reversed, with the current belief that there is a 70% chance the Federal Reserve will cut rates in December. The Federal Reserve will enter a quiet period starting November 29, during which Powell has no public speaking or media interview schedule. Williams' remarks, as a “close ally,” could be the last influential statements by a Federal Reserve official affecting market expectations. Continuing with previous views, it is expected that December might see a “close call” rate cut of 25bps. For the market, the reversal of rate cut expectations, combined with the advancement of the “28 points” plan and the Trump administration's consideration of exporting H200 chips to China, indicates that macro factors will no longer be a source of pressure for the market in the short term. The market may focus more on issues such as AI companies issuing bonds and cryptocurrency trends.
• The probability of a 25 basis point rate cut by the Federal Reserve in December on Polymarket has risen to 67%.