Powell's spokesperson defected, and the truth about the Fed's December interest rate cut was exposed

As the central bank of the United States, the Federal Open Market xm-forex.committee (FOMC) of the Federal Reserve holds eight regular meetings each year and is responsible for deciding to raise, lower, or maintain the federal funds rate—the overnight reserve lending rate among depository financial institutions.

Because the federal funds rate will be transmitted to other key interest rate systems, the Federal Open Market xm-forex.committee's decision will profoundly affect consumers' daily lives, ranging from the cost of home purchase to the mood of the job market. At the same time, this decision will also affect the borrowing costs and recruitment strategies of xm-forex.companies.

The final meeting of the 2025 Federal Open Market xm-forex.committee is scheduled to be held on December 9th and 10th. The market is paying close attention to whether the Federal Reserve will initiate a third consecutive interest rate cut.

After successively implementing 25 basis point interest rate cuts in September and October, Chairman Jerome Powell has made it clear that another interest rate cut before the end of the year is not an established fact.

In fact, the minutes of the October Federal Reserve meeting showed that officials had significant differences on the subsequent policy path. The market expectations and core observation signals of the December Federal Reserve meeting will be broken down in detail below.

The 12 members with voting rights this time are Schmid, Susan Colin, Bowman, Millan, Waller, Williams, Musallem, Jefferson, Lisa Cook, Barr, Goolsby and Powell.

Core economic indicators affecting the meeting

The recent U.S. government shutdown has added uncertainty to the Federal Reserve's interest rate decision, and the shutdown has interrupted the release of key data in the weeks leading up to the Federal Open Market xm-forex.committee's year-end meeting.

During the 43-day shutdown,Core government agencies failed to release regular reports on inflation, employment and consumer spending as scheduled, forcing the Fed to rely on alternative data sources to assess economic fundamentals - a situation that Powell likened to "driving in fog."

The core inflation rate, which excludes food and energy price fluctuations, is still hovering near 3%, significantly higher than the Federal Reserve's 2% policy target. Among them, the rise in xm-forex.commodity prices triggered by the new tariff policy is one of the key factors driving inflation to remain high.

At the press conference after the October meeting, Powell expressed cautious optimism about the inflation situation, but concerns about the job market have increased significantly.

Although the current unemployment rate is still at a relatively low level, and the weekly data tracked by the Federal Reserve does not show a wave of layoffs, the rate of job creation has slowed down significantly. Some xm-forex.companies have announced a hiring freeze or started layoffs, which shows that although the job market has not seen a cliff-like weakening, the cooling trend has clearly emerged.

Powell clearly pointed out in October: "Against the current background of weakened and slightly weak job market vitality, the downside risks to employment have increased significantly in recent months."

After the above statement, the postponed September employment report was released in mid-November. The results were better than market expectations, confirming that although the job market has slowed down, it remains stable overall: employers added 119,000 jobs that month, and the unemployment rate rose slightly.

The October employment data will be postponed to mid-December, when the next Federal Reserve meeting has concluded.

At the same time, U.S. economic growth has exceeded expectations, and strong consumer spending has become the core driver of gross domestic product (GDP) growth.

However, it is worth noting that the consumption pattern is showing obvious differentiation: high-income families have strong willingness to consume, while low-income families are forced to cut spending.

Powell mentioned in his October speech that "there are already a lot of empirical clues" about this "K-shaped economy" phenomenon.

Divergent statements from Federal Reserve officials

Federal Reserve officials have released conflicting signals before the December meeting of the Federal Open Market xm-forex.committee. Their public remarks clearly reflect the deep differences within the xm-forex.committee on whether to cut interest rates again: some officials insist that inflation remains high and oppose further interest rate cuts; others firmly believe that weak employment growth is a risk that needs to be dealt with more urgently.

Powell has clearly acknowledged the differences of opinion within the Federal Open Market xm-forex.committee, which is the core reason why he has repeatedly emphasized that another interest rate cut in December is not a certainty.

The stance of hawkish officials focusing on inflation risks

As the Eagle King, Schmid believes that employment can be attributed to immigration policies and the impact of AI.

Susan Collins stated on November 21 that maintaining interest rate stability at present is an "appropriate policy choice" because she expects inflation to remain high in the short term.

These two persons have voting rights.

In addition, Atlanta Federal Reserve Bank President and CEO RaphaelBostic listed inflation as the Fed's most pressing policy concern right now.

As a non-voting member of the Federal Open Market xm-forex.committee, although he does not have the right to participate in voting on interest rate decisions, he is deeply involved in policy discussions and affects the direction of the debate.

Bostic pointed out that recent business survey data show that xm-forex.companies plan to continue to raise product prices in 2026; he also warned that prematurely starting to cut interest rates may lead to a rebound in inflation.

Bostic said at an industry event in Seattle on November 14: "I have supported two interest rate cuts before. Whether the next interest rate cut needs to be judged based on data, I will be guided by objective data to determine the optimal policy direction."

The stance of dovish officials who support interest rate cuts

Bowman, Millan, and Waller are directors directly appointed by Trump and are pure doves. Among them, Bowman was a hawk before, but then suddenly turned dove.

Federal Reserve Governor Stephen Millan has been pushing for an interest rate cut. He said on November 10: "Unless there are new data that change my economic forecasts, looking forward to the future, I still think that a 50 basis point interest rate cut is appropriate - as I have previously advocated, even if it is less than this, at least a 25 basis point interest rate cut should be implemented."

Federal Reserve Governor Christopher Waller issued a message to a group of economists in London on November 17 In his speech, he expressed a similar position on interest rate cuts: "I am not worried about the acceleration of inflation or the sharp de-anchoring of inflation expectations. My core focus is the job market.

The main turning point is that Williams said in a recent public speech in Santiago, Chile: "My judgment is that as the job market cools, the downside risks to employment have increased, while the risks to inflation have eased; after excluding the second round of transmission effects caused by tariffs, core inflation still maintains a downward trend. "

He further added: "I still believe that it is necessary to fine-tune the target range of the federal funds rate in the near future to bring the policy stance closer to the neutral level. ”

The above are the four voting xm-forex.committee members with voting rights this time

At the same time, Mary Daly, President and CEO of the Federal Reserve Bank of San Francisco, clearly expressed concerns about the job market in a blog post on November 10, and emphasized the importance of “maintaining policy flexibility” on whether to further cut interest rates.

She also pointed out that the slowdown in employment growth and the narrowing of wage increases are more It mostly reflects the cooling of corporate labor demand, rather than the shortage of labor supply caused by tightening immigration policies.

After months of weakness, the September employment report later this week, or any other data in the xm-forex.coming weeks, will hardly change my view of supporting another interest rate cut. ”

The view of officials taking a wait-and-see attitude

The remaining 6 Fed officials are in a policy swing.

Alberto Mussallem, President and CEO of the Federal Reserve Bank of St. Louis, said at a Fixed Income Analysts Association event on November 6: "IWe must maintain a high degree of caution, not only to continue to xm-forex.combat inflationary pressures above the target, but also to provide necessary policy protection for the job market. "

Federal Reserve Vice Chairman Philip Jefferson said that although he acknowledged that the risk of unemployment has increased, the Fed still needs to adhere to the principle of caution, but also expressed that its focus is like unemployment.

On November 17, Jefferson pointed out in a speech at the Federal Reserve Bank of Kansas City: "The current policy stance is still somewhat restrictive, but it has gradually moved closer to a neutral level that neither suppresses nor stimulates the economy.

The dynamic changes in the risk balance indicate that we need to adopt a steady advancement strategy in the process of approaching the neutral interest rate. "

At the same time, Barr emphasized the risks of private equity and private bank funds, and Lisa Cook also preferred the need to provide liquidity to the market.

Goolsby is a cautious dove and is uneasy about inflation. Finally, Powell was classified as waiting and watching, but the two chairs who have been close to Powell recently revealed a dovish turn.

It is worth noting that New York Fed President John Williams is often in step with Powell, and on Friday he was open to cutting interest rates. , he said he still saw "room for further adjustments in the short term."

A few days later, San Francisco Fed President Mary Daly took a similar stance. She believed that "there is room for further adjustments in the short term." Although Daly does not vote on interest rates this year, he is widely considered to be a supporter of Powell.

Joseph Gagnon, a senior fellow at the Peterson Institute for International Economics and a former Fed official, said: "Both of them are quite centrist and have a close relationship with Chairman (Powell). ”

Of these six voting officials who are holding a wait-and-see attitude, it is observed that the majority favors an interest rate cut. In other words, except for Goolsby and Musallem who explicitly mentioned inflation, the others prefer to support an interest rate cut, but the interest rate cut is relatively vague.

The core observation dimension of the meeting

Although the federal government publicly The results of the market xm-forex.committee's year-end meeting will be announced directly, but the wording related to the interest rate decision will reveal key clues about the Fed's future policy priorities.

Investors need to focus on the core issues added and emphasized by the xm-forex.committee in the public statement: If the statement focuses on continued high inflation, it may imply that the Fed is cautious about cutting interest rates. ; If there is a focus on stagnant hiring or "downside risks" in employment, it indicates that concerns about the job market are increasing.

The press conference after the statement can often provide more in-depth policy signals - Powell will have the opportunity to explain the xm-forex.committee's decision-making logic in detail.

If his speech mentions increased layoffs and employment growth. Expressions such as a long-term slowdown or cooling labor demand may indicate that the Fed is more open to future interest rate cuts; conversely, emphasizing the resilience of inflation or warning of the risk of premature easing may mean that more policy paths will be adopted to suspend interest rate increases in the future.

Core conclusion:

The probability of the Fed cutting interest rates this time has suddenly increased from 30%.The path to reverse to 80% is clear. First of all, the five neutral members are more inclined to cut interest rates. Under this premise, the style change of Williams and Daly, who are close to Powell, instantly made the Fed’s interest rate meeting in December lose suspense.

In the future, we can mainly focus on the marginal attitudes of each xm-forex.committee member’s speeches to observe the focus of the Fed. In particular, speeches with changes in marginal attitudes are key variables that affect the Fed’s interest rate agenda.

Whatever decision the Federal Open Market xm-forex.committee makes in December will set the tone for Fed policy in 2026.

Although the core contradiction of this meeting is to balance inflationary pressure and job market concerns, the Fed's ultimate goal is always to achieve long-term stable operation of the economy - this underlying logic will run through the entire process of policy decision-making.

The above content is all about "[XM Foreign Exchange Decision Analysis]: Powell's spokesperson defected on the battlefield, and the truth about the Fed's December interest rate cut was exposed". It was carefully xm-forex.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!

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