Fed December Rate Cut Uncertainty: Market Reassessment and FOMC Division Analysis

This analysis is based on the CNBC report [1] published on November 13, 2025, which revealed that markets have significantly reduced expectations for a December Federal Reserve rate cut. The probability of a December rate cut fell to approximately 49.4% [1], representing a dramatic shift from 95% just one month ago [1][2].

The reassessment triggered substantial market volatility on November 13, 2025:

• S&P 500 (^GSPC):
  Closed at 6,737.49, down 88.98 points (-1.3%) [0]
• NASDAQ Composite (^IXIC):
  Closed at 22,870.36, down 392.28 points (-1.69%) [0]
• Dow Jones Industrial Average (^DJI):
  Closed at 47,457.22, down 716.7 points (-1.49%) [0]
• Russell 2000 (^RUT):
  Closed at 2,382.98, down 58.63 points (-2.4%) [0]

Sector performance showed broad-based weakness, with Consumer Cyclical (-2.87%), Utilities (-3.11%), Real Estate (-2.37%), Energy (-2.16%), Financial Services (-1.49%), and Technology (-1.57%) all posting significant losses [0]. Treasury yields moved higher as markets adjusted expectations for potentially prolonged higher rates [1].

The uncertainty stems from unprecedented divisions within the Federal Open Market Committee:

• Boston Fed President Susan Collins: “Relatively high bar for additional easing” [1][2]
• Kansas City Fed President Jeffrey Schmid: Voted against October cut [1]
• Cleveland Fed President Beth Hammack: Favors steady rates [2]
• St. Louis Fed President Alberto Musalem: Policy needs to “lean against” inflation [2]

• Fed Governor Stephen Miran: Advocated for half-point cuts [1]
• Fed Governor Christopher Waller: Supports easier policy [2]
• Fed Governor Michelle Bowman: Supports easier policy [2]

• Fed Chair Jerome Powell: “Not a foregone conclusion—far from it” [1]
• San Francisco Fed President Mary Daly: “Open mind,” decision “premature” [2]
• Minneapolis Fed President Neel Kashkari: Opposed October cut, on fence about December [2]

The recent government shutdown has created critical information gaps that are directly affecting policy deliberations. Key inflation and labor market data for October may never be released [1][2], with White House guidance indicating some October data “may never come out” [1]. This data vacuum forces reliance on private sector indicators, which are sending mixed signals—ADP data showing job losses while TLR Analytics reports strong sales tax receipts [2].

The shift from 95% probability to 49.4% within one month represents one of the most significant market repositioning events in recent Fed policy cycles [1][2]. This rapid reassessment highlights growing market sensitivity to Fed communications and the unprecedented level of FOMC division currently present.

The December 10-11 FOMC meeting now carries heightened importance as investors seek clarity through the December dot plot. Analysts suggest potential for 3-4 dissents regardless of the decision [2], indicating ongoing committee division. Looking ahead, January 2026 brings new voting members, potentially shifting the balance [1], while Powell’s chair term ending in May 2026 adds leadership uncertainty [1].

The analysis reveals several risk factors that warrant attention:

1. Policy Uncertainty Risk:
   The unprecedented level of FOMC division increases the risk of market volatility around the December meeting [1][2]. Markets may experience heightened sensitivity to any Fed communications in the coming weeks.

2. Data-Driven Decision Risk:
   Decisions made with incomplete economic data could lead to policy missteps [1][2]. The absence of official October inflation and labor data creates an unusual environment for monetary policy formulation.

3. Market Volatility Risk:
   The sharp probability shift and corresponding market declines (with Russell 2000 down 2.4%) [0] suggest elevated volatility risk as investors position for various outcomes.

1. Information Advantage:
   Investors monitoring private sector data alternatives (ADP, TLR Analytics) may gain insights ahead of official releases [2].

2. Communication Tracking:
   Increased Fed speaker frequency ahead of the meeting provides opportunities for early signal detection [1].

3. Yield Curve Analysis:
   Treasury yield movements (2-year and 10-year) serve as real-time policy expectation gauges [1].

• Current Rate Cut Probability:
  49.4% for December meeting (down from 95% one month ago) [1][2]
• Target Rate Range:
  3.5%-3.75% if cut occurs vs. current 3.75%-4.00% [2]
• Key Data Gap:
  Official October inflation and labor market data may never be released [1][2]
• FOMC Division:
  Significant split between hawkish and dovish voting members [1][2]
• Market Impact:
  Major indices declined 1.3-2.4% on November 13 [0]
• Treasury Response:
  Yields moved higher reflecting extended rate expectations [1]

The situation remains fluid with investors now focusing on any November data releases and Fed communications for clearer policy signals ahead of the December 10-11 FOMC meeting [1][2].