It’s looking increasingly likely that Jerome Powell’s Christmas gift to markets will be an economic lump of coal, rather than what’s on Wall Street’s wish list. Odds for a December cut to interest rates at the Federal Open Market Committee’s (FOMC) final meeting of the year are fading fast, despite hopes all year for one last reduction. At the time of writing, CME’s FedWatch barometer shows a 32% probability of a 25bps cut next month. That’s compared to a 98.9% conviction of a cut a month ago.
The general consensus is now for the Fed to keep rates hold, with the base rate sitting at 3.75% to 4%. This will likely infuriate the White House, which has been pushing throughout 2025 for significant reductions—with President Trump blaming “Too Late Powell” for a housing crisis in the U.S.
While Wall Street won’t love a hold, it does have some justification for betting on one in advance of the U.S. Federal Reserve decision. Notes from the FOMC’s most recent meeting in October, released yesterday, painted a picture of a divided committee.
Fed members were split on inflation, which should be at 2%, but currently sits at 3%. The notes described how several members were comfortable with current levels, arguing it’s “close” to target.
