The Federal Open Market Committee has just one scheduled meeting left for 2025, with a decision on interest rates on December 10. Currently markets view it finely balanced as to whether the FOMC cuts, or holds rates steady at their current level of 3.75% to 4%. Generally the Fed is viewed as being on a path to bring rates closer to 3% over 2026, according to the expectations of fixed income markets as assessed by the CME’s FedWatch Tool. Still, the timing is unclear.
The minutes of the Fed’s October meeting will be released on November 19 and may offer further clues as to the monetary policy. Several members of the committee are expected to make the case for lower interest rates.
Waller Makes The Case For Lower Rates
For example Fed Governor Christopher Waller, who has recently been pushing for lower rates, summarized his view on the economy in a recent speech, “So, what is that data telling us? First, that the labor market is still weak and near stall speed. Second, that inflation through September continued to show relatively small effects from tariffs and support the hypothesis that tariffs are having a one-off effect raising price levels in the U.S. and are not a persistent source of inflation. Accounting for estimated tariff effects, underlying inflation is relatively close to the Federal Open Market Committee’s (FOMC) 2 percent target. Third, despite realized inflation running close to 3 percent and above target for five years, medium- and longer-term inflation expectations remain well anchored. And, lastly, even excluding the temporary effects of the shutdown, growth in real gross domestic product (GDP) has likely slowed in the second half of 2025 from its fast pace in the second quarter.” To make his view clear, Waller’s November 17 speech was titled, “The Case for Continuing Rate Cuts.”
Therefore, Christopher Waller may make the case for lower rates and Stephan Miran may want them lower still. There may be resistance from other policymakers.
Jeffrey Schmid’s Dissent
For example, Kansas City Fed President, Jeffrey Schmid, dissented from the decision to cut at the FOMC’s October meeting, preferred to maintain rates at the then-current level. On October 30, he wrote that, “By my assessment, the labor market is largely in balance, the economy shows continued momentum, and inflation remains too high. I view the stance of policy as only modestly restrictive. In this context, I judged it appropriate to maintain the policy rate at this week’s meeting.”
December’s meeting, too, could also have dissents, with policymakers preferring both higher and lower levels for interest rates. In part this rests on an assessment of the labor market. The 43-day government shutdown has delayed or eliminated some reporting on the labor market. The Bureau of Labor Statistics intends to release the Employment Situation report for September on November 20. However, policymakers will care more about more current trends from October into November. In recent months, job creation appears soft, however, policymakers debate whether there is sufficient weakness to present a significant economic risk.
What To Expect
There are several weeks before the scheduled December 10 FOMC decision. It appears policymakers may decide to cut interest rates or elect to hold rates steady. Much will depend on upcoming jobs data over the coming weeks. If unemployment rises more than anticipated, then that may make an interest rate cut more probable. However, if the employment picture remains more stable, then policymakers may hold rates steady. It may be a finely balanced decision with dissents on either side.