Fed's December interest rate cut decision: Who is in favor? Who is against?

Author: Deng Tong, Golden Finance

Reprinted: White55, Mars Finance

On November 21, according to CME's “FedWatch”: the probability of the Federal Reserve cutting interest rates by 25 basis points in December is 39.6%, while the probability of maintaining the current rate is 60.4%. On the same day, Federal Reserve Vice Chairman and New York Fed President Williams stated that the Federal Reserve could cut rates “in the near term” without jeopardizing its inflation targets. As a result of these remarks, the probability of “predicting a 25 basis point rate cut by the Fed in December” on Polymarket rose to 61%. Today, according to CME's “FedWatch” data: the probability of the Federal Reserve cutting 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' speech, the BTC price had been continuously falling, even reaching $82,000. After the interest rate cut remarks were made, the BTC price began to slowly recover, reaching $87,067.46 at the time of writing.

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 Federal Reserve candidates in the coming months. We may determine the Federal Reserve Chairman candidate around the New Year. The market is currently paying close attention to the Federal Reserve FOMC meeting.

1. Federal Reserve FOMC Meeting Voting Mechanism

The decision-making of the Federal Open Market Committee (FOMC) of the Federal Reserve is based on a majority vote, with each voting member having an equal vote. The committee consists of 12 voting members, which are 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 reserve bank governors, 4 serve in rotation, with 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 committee's discussions.

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, showcasing 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 the breaks of meetings, working to reach a consensus, but this does not guarantee that a consensus will be reached.”

Reaching a consensus among all members of the Federal Reserve helps convey a consistent message from Fed officials regarding their views on actions to the market. Conversely, if the voting results show divergence, it may raise questions about whether the Federal Reserve believes its actions are correct and about the motivations of its officials.

2. The FOMC voting members and their inclinations in 2025

Permanent voting member ( Federal Reserve Board member and New York Fed President )

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

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 action may not necessarily continue until December as previously widely predicted. “Further rate cuts at the December meeting are not a done deal, far from it. There are significant differences of opinion today. It is clear that we have not yet made a decision on the interest rate direction for December.” Powell acknowledged that the Federal Reserve is in a difficult position, with economic trends pulling monetary policy in opposite directions. “The situation we face now is that inflation is at an upward risk while employment is at a downward risk. We have only one tool… you cannot address both issues at the same time.”

John C. Williams, Vice Chairman ( President of the New York Fed ): Leaning towards interest rate cuts

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 target, while also helping to prevent a decline in the labor market. "I think monetary policy is tightening slightly… 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. " Williams stated that the Federal Reserve needs to achieve its inflation target without excessively risking the full employment goal.

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

During a speech after the Federal Open Market Committee (FOMC) decided to cut interest rates for the first time since 2025 in September, Bowman stated: “Now is the time for the committee to take decisive and aggressive action to address the declining vitality of the labor market and signs of weakness. We are likely already behind the curve in responding to the deteriorating conditions of the labor market.”

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

Milan clearly supports a rate cut in December and believes it is “very appropriate.” On November 15, he emphasized that the data since September has been overall dovish, supporting the Federal Reserve's strengthening dovish stance. Earlier, he also suggested a rate cut of 50 basis points, and at least a cut of 25 basis points. He believes that if economic data does not change significantly, 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 doubts about his independence—his radical stance has exacerbated divisions within the Federal Reserve.

Christopher J. Waller, Federal Reserve Governor: Prefers interest rate cuts

On November 17, Waller stated that he supports a reduction of the key interest rate in the U.S. by 0.25 percentage points again 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 contacts with large employers, he is convinced that the labor market conditions have deteriorated. He noted that due to the record 43-day government shutdown, critical employment data had been delayed, and once released, the results are likely to be contrary. “The labor market remains weak, close to stagnation.” Meanwhile, inflation has not risen significantly in recent months. He stated that the economic slowdown and high interest rates have suppressed consumer spending, which helps control inflation. “In light of signs of slowing economic growth, and the weak labor market potentially leading to moderate wage growth, I believe there are no factors that would lead to a speeding up of inflation.”

Michael S. Barr, Federal Reserve Governor: Cautious Rate Cut

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 the two aspects of our mission.”

Lisa D. Cook, Federal Reserve Governor: Indecisive

In an interview with the Brookings Institution in Washington, Cook stated: “I make my monetary policy decisions at each meeting based on the latest data from various sources, my changing expectations, and the balance of risks. Each meeting, including the one in December, is a live meeting.”

Philip N. Jefferson, Federal Reserve Governor: Indecisive

On November 17, Jefferson pointed out that as the Federal Reserve relaxes its policies to a point that may halt progress in slowing inflation, it needs to “proceed slowly” on further interest rate cuts. “In recent months, I believe the balance of risks in the economy has shifted, with the downside risks to employment having increased compared to the upside risks of inflation, which may have recently declined,” Jefferson stated, adding that he would be guided by data and adopt a “meeting-by-meeting” approach to determine policy. “At this current juncture, this is an especially prudent approach.” Ahead of the December Federal Reserve policy meeting, “it remains unclear how much official data we will see.”

2025 rotating voting members ( regional Federal Reserve president )

Susan M. Collins, President of the Boston Federal Reserve: Leans towards not lowering 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 deterioration in the labor market, I would not easily ease policy, especially in the context of limited inflation information due to the government shutdown. In the current highly uncertain environment, it may be appropriate to maintain the policy rate at the current level for a period of time to balance inflation and employment risks.”

Alberto G. Musalem, President of the St. Louis Federal Reserve: Tends not to lower interest rates

On November 10, Moussailem expressed clear skepticism about the prospects for further monetary easing. In an interview with the media, he stated: “We must act cautiously at this moment, which is crucial. I believe that the room for further easing of policies is very limited without making the policies excessively loose.” Moussailem 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 mildly restrictive; and the labor market has also cooled orderly. “I think we need to continue taking steps to curb inflation.”

Jeffrey R. Schmid, President of the Kansas City Fed: Prefers not to cut interest rates

On November 14, Schmid stated that the role of further interest rate cuts in reinforcing high inflation may outweigh the support effect on the labor market: “I believe that further interest rate 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 policies. However, rate cuts may have a more lasting impact on inflation, as they will increasingly raise doubts about our commitment to the 2% inflation target.” This reasoning is guiding his thoughts on the upcoming Federal Reserve policy meeting in December, 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 Chartered Financial Analyst Association in Indianapolis 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 in a state of uncertainty or hold a stance against lowering rates.

3. Expectations for the Federal Reserve's rate cut in December from the outside world.

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. According to recent speeches, Barclays believes that governors Mulan, Bowman, and Waller may support a rate cut, while regional Fed presidents Musalem and Schmid are inclined to keep rates unchanged. Governors Barr and Jefferson, along with Goolsbee and Collins, have recently indicated that their stance is still unclear, but they lean towards maintaining the status quo. Governors Cook and Williams rely on data but seem more supportive of a rate cut. 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 stance is quite high.

CITIC Securities research report states that New York Fed Chairman Williams hinted at further rate cuts in December, reversing market expectations for rate cuts; currently, the market believes there is a 70% chance that the Fed will cut rates in December. The Fed will enter a quiet period starting on November 29, during which Powell has no public speaking or media interview schedule, and Williams' remarks may be the last comments from a Fed official to influence market expectations. Continuing the previous view, it is expected that December could be a “close call” for a rate cut of 25bps. For the market, the reversal of rate cut expectations, combined with the advancement of the “28 points” plan and news that the Trump administration is considering exporting H200 chips to China, means 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 has risen to 67% on Polymarket.