Markets now see a coin toss for a December cut as Fed officials grow cautious
The Federal Reserve’s last meeting of 2025 is set to be highly contentious, with officials deeply divided over a possible third rate cut this year.
What once looked like a sure bet for lower borrowing costs has turned into a toss-up, with market-implied odds of a December move falling from nearly 100% to just under 50%, according to CME FedWatch.
The shift reflects mounting skepticism inside the Fed as policymakers weigh persistent inflation against pockets of labor market weakness.
“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,” San Francisco Fed president Mary Daly said during an event in Dublin, Ireland.
Daly, previously a reliable supporter of easing, flagged the decision as “premature” with four weeks to go.
Minneapolis Fed president Neel Kashkari, who had earlier signaled support for a third cut, revealed he opposed last month’s move and remains undecided for December.
“We have inflation that’s still too high, running at about 3%,” Kashkari said at a regional conference, adding that while some sectors are strong, others in the labor market are “under pressure.”
Boston Fed president Susan Collins, who voted for both cuts this year, added: “Absent evidence of a notable labor market deterioration, I would be hesitant to ease policy further, especially given the limited information on inflation due to the government shutdown,” Collins said at a bankers’ conference.
She described a “relatively high bar” for additional easing and warned that the policy rate may need to stay on hold “for some time.”
The lack of official data, a result of the recent government shutdown, has left policymakers "flying blind."
The federal government reopened Thursday after a record 43-day shutdown, with President Trump signing a stopgap bill that will fund operations through January 30.https://t.co/8wl5pbkQm9
— Mortgage Professional America Magazine (@MPAMagazineUS) November 13, 2025
“All of that economic data released will be permanently impaired, leaving our policymakers at the Fed flying blind at a critical period,” White House press secretary Karoline Leavitt said.
Some economists suggested that the lack of official data could sway the Fed to hold rates steady, though resumed releases may shift market expectations.
“That depends on whether government data for GDP growth, inflation, and employment are out by the December meeting,” Shelly Antoniewicz, chief economist with the Investment Company Institute (ICI), told Mortgage Professional America.
“Without this data, I don’t think it would be a surprise if the Fed holds in December. Powell has already telegraphed that intention to the market. If the data starts coming out again, market expectations for a cut could move dramatically depending on what it shows about the state of the economy.”
With the Federal Open Market Committee’s voting members openly divided, the December 9–10 meeting could see more than the usual number of dissents.
“Boston Fed President Collins’ decision to speak out clearly against a December cut raises our level of concern about Powell’s struggle to manage deep divisions within the FOMC and creates additional uncertainty over the path of rates,” Krishna Guha, vice chairman at Evercore ISI, wrote in a note.
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