Television stations broadcast Jerome Powell, chairman of the US Federal Reserve, speaking after a Federal Open Market Committee (FOMC) meeting on the floor of the New York Stock Exchange (NYSE) in New York, US, on Wednesday, Oct. 29, 2025. Federal Reserve officials delivered their second consecutive interest-rate reduction to support a softening labor market, and said they would stop shrinking the central bank’s portfolio of assets on Dec. 1. Photographer: Michael Nagle/Bloomberg
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Fixed income markets now project a 1 in 3 chance that the Federal Open Market Committee elects to cut interest rates on December 10. That’s largely in response to hawkish minutes released on November 19 for the FOMC’s October 28-29 meeting. Although policymakers did cut interest rates at that meeting, expectations for a December cut amongst policymakers appeared muted, at least at the time of the October meeting.
October Comments On December Meeting
Specifically the October FOMC minutes noted that, “participants expressed strongly differing views about what policy decision would most likely be appropriate at the Committee’s December meeting. Most participants judged that further downward adjustments to the target range for the federal funds rate would likely be appropriate as the Committee moved to a more neutral policy stance over time, although several of these participants indicated that they did not necessarily view another 25 basis point reduction as likely to be appropriate at the December meeting. Several participants assessed that a further lowering of the target range for the federal funds rate could well be appropriate in December if the economy evolved about as they expected over the coming intermeeting period. Many participants suggested that, under their economic outlooks, it would likely be appropriate to keep the target range unchanged for the rest of the year. All participants agreed that monetary policy was not on a preset course and would be informed by a wide range of incoming data, the evolving economic outlook, and the balance of risks.”
Some Support For A Cut
Previously, fixed income markets saw a December cut as reasonably likely. It appears policymakers did not broadly share that view. That said, it is likely certain FOMC members will support a cut. For example, Christopher Waller recently spoke in support of the case for an interest rate cut and Stephen Miran dissented in voting for a larger October cut. However, these views may be more outliers than consensus within the FOMC group. President Trump likely nominating a new Fed Chair in the coming weeks perhaps complicates the picture a little, too.
What To Expect
Fixed income markets have dialed back expectations for a December interest rate cut somewhat. The most likely scenario according to fixed income markets is that rates are held steady. However, it does also appear that policymakers see interest rates declining over the medium term.
As such, December might represent a pause in cutting interest rates rather than any fundamental change of direction for monetary policy. That said, there is still important economic data to be released before the FOMC meets. In particular, jobs market data will be key.
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FOMC officials are not necessarily optimistic on the jobs market, the October minutes stated that. “Regarding the outlook for the labor market, participants generally expected conditions to soften gradually in coming months and the labor market to remain less dynamic than earlier in the year, with businesses reluctant to add workers but also hesitant to lay off employees.”
However, the key to that expectation is a gradual softening in employment. If there were signs of more abrupt job losses, then officials may be motivated to cut interest rates more aggressively. Still, for now, the FOMC may hold rates steady in December based on what the October minutes suggest.