Only 44.4% of investors think the U.S. Federal Reserve will cut its benchmark rate by 25 basis points to the 350-375 range at the December FOMC meeting. The probability of a 25 bps rate cut has declined from 94.2% on October 15 to 66.9% a week ago (November 7), and then further to 50.1% on November 13.
Data from the Chicago Mercantile Exchange (CME) Group also showed that the number of investors who believe the Fed will or should hold its rate has increased over the same period. The probability of rates staying the same has risen from 5.7% on October 15 to 33.1% on November 7, and then further up to 49.9% on November 13 before settling at 55.6%.
However, several financial institutions and market analysts are reportedly projecting at least two interest rate cuts before the end of the year. Goldman Sachs and Citigroup are among the institutions that have predicted at least three additional 25-basis-point cuts in 2025.
Powell says December rate cut is a dilemma
The Chairman of the Federal Reserve, Jerome Powell, recently stated that there are differing views among members of the FOMC on how it should proceed in December. However, he pointed out that a further reduction in the benchmark rate at the December FOMC meeting remains possible.
Meanwhile, Minneapolis Fed President Neel Kashkari said a few months ago that a third rate cut by the end of 2025 would be warranted. However, Kashkari recently disclosed that he had opposed the October rate cut due to the economy’s resilience, but is now undecided about the December rate cut.
San Francisco Fed President Mary Daly also came close to agreeing with Kashkari’s sentiment during an event in Dublin, Ireland.
“I have an open mind, but I haven’t made a final decision on what I think, and I’m looking forward to debating with my colleagues.”
–Mary Daly, San Francisco Fed President
Daly, who has until now been a firm supporter of rate cuts, stated on November 14 that any decision made four weeks ahead of the next FOMC meeting is premature.
Boston Fed President Susan Collins also said she is hesitant to ease policy further, especially given the limited information on inflation due to the government shutdown. Collins voted for both rate cuts this year.
Powell claims the Fed will collect every available data for analysis
The Fed chair said on Thursday that the Federal Reserve will collect every available piece of data, evaluate it, and carefully consider it, casually adding that it is the Commissioners’ job to do that. Powell said the Fed has already identified private data it can use, along with its own in-house surveys of business executives. Data will also be collected through informal interviews with a range of nationwide contacts.
Fed chair Jerome Powell said the December meeting will be like driving in the fog, pointing out that the only option is to slow down. However, he could not confirm whether the Fed would cut its benchmark rate during the December FOMC meeting.
Powell’s remarks show the developing dilemma for the Fed as it prepares for the December meeting. Meanwhile, the government has been unable to conduct surveys and produce reports that are key to the central bank’s policy decisions. Jerome says this could delay rate cuts that even President Donald Trump wants.
Beyond the data issue, Powell also believes the Fed should be charting a path for monetary policy moving forward. He said he feels like the Fed should at least wait a cycle before cutting rates again.
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