Deng Tong, Jinse Finance
According to CME's "FedWatch": the probability of the Federal Reserve cutting interest rates by 25 basis points in December is 69.4%, and the probability of keeping rates unchanged is 30.6%. White House economic advisor Hassett pointed out: the new leadership of the Federal Reserve may cut interest rates, Trump may interview Federal Reserve candidates in the coming months, and we may determine the Federal Reserve Chairman around the New Year. The market is currently paying close attention to the Federal Reserve FOMC meeting.
I. Voting Mechanism of the Federal Reserve FOMC Meeting
The Federal Open Market Committee (FOMC) of the Federal Reserve adopts a majority vote system, and each member with voting rights has an equal vote. The committee has 12 members with voting rights, which are composed of two parts: permanent voting members and rotating voting members.
All members of the Board of Governors (maximum seven);
President of the Federal Reserve Bank of New York;
Of the remaining 11 Reserve Bank presidents, four serve on a rotating basis for a one-year term.
The seven Reserve Bank presidents without voting rights attend Federal Open Market Committee (FOMC) meetings and participate in the committee's discussions.
Voting Mechanism
Majority Vote:At the end of each two-day meeting, participants vote on monetary policy proposals (e.g., whether to adjust the target range for the federal funds rate). Proposals receiving a majority of votes are adopted.
Consensus:Despite the voting mechanism, FOMC members typically engage in extensive discussions and consultations to seek consensus, ensuring that policy decisions have broad support and thus send a consistent message to the markets. **Dissent Recording:** If a voting member disagrees with the final decision, their dissent will be formally recorded in the meeting minutes, demonstrating the diversity of opinions within the committee. LPL Financial Chief Economist Jeffrey Roach stated, "In reality, committee members communicate closely between meetings, striving to reach a consensus, but this doesn't guarantee that a consensus will be achieved." Achieving consensus among all Federal Reserve members helps send a message to the market that Fed officials agree on their actions. Disagreements in voting can raise questions about whether the Fed believes its actions are correct and the motivations of Fed officials.
II. Voting Members and Tendencies of the 2025 FOMC
Permanent Voting Members (Members of the Federal Reserve Board of Governors and President of the New York Fed)
Jerome H. Powell, Chairman (Federal Reserve Board of Governors): Undecided
On October 29, at the press conference following the Fed's decision to cut interest rates by 25 basis points, Powell stated that the rate cuts would not necessarily continue into December as widely predicted. "Further rate cuts at the December meeting are not a done deal, far from it. There is a great deal of disagreement today. Therefore, we have not yet made a decision on the direction of interest rates in December." Powell acknowledged the Fed's difficult situation, with economic trends pulling monetary policy in the opposite direction.
“We are now facing upside risks to inflation and downside risks to employment. We only have one tool…you can’t deal with both at the same time.” John C. Williams, Vice Chairman (President of the New York Fed): Leaning Towards Rate Cuts Williams stated at a meeting of the Central Bank of Chile that U.S. interest rates are likely to fall without jeopardizing the Fed’s inflation target, while also helping to prevent a decline in the job market. “I think monetary policy will tighten slightly…therefore, I think there is still room for further adjustments to the target range for the federal funds rate in the near term to bring the policy stance closer to the neutral range.” Williams said the Fed needs to achieve its inflation target without “excessively jeopardizing its goal of full employment.” Michelle W. Bowman, Federal Reserve Governor: Leaning Towards Rate Cuts Speaking after the Federal Open Market Committee (FOMC) decided to cut interest rates for the first time since 2025 in September, Bowman said, "Now is the time for the Committee to take decisive and aggressive action to address signs of declining labor market activity and fragility. We are likely already behind in addressing the deteriorating labor market conditions." Stephen I. Miran, Federal Reserve Governor: Leaning Towards Rate Cuts Miran explicitly supports a rate cut in December, considering it "very appropriate." On November 15, he emphasized that the data since September has been generally dovish, supporting the Fed's strengthened dovish stance. Earlier, he had also suggested a 50-basis-point cut, or at least a 25-basis-point cut. He believes that if there are no significant changes in economic data, continuing rate cuts is a "consistent and reasonable option." Milan, the former White House chief economic advisor appointed by Trump, has faced questions about his independence—his radical stance has exacerbated divisions within the Federal Reserve. Christopher J. Waller, Federal Reserve Governor: Leaning Towards Rate Cuts On November 17, Waller stated that he supports another 0.25 percentage point cut in the key U.S. interest rate in December to help boost the weak U.S. labor market—and he doubts he will change his mind. Waller stated that based on surveys of consumers and businesses, as well as his own contacts with large employers, he is convinced that labor market conditions have deteriorated. He pointed out that key employment data, delayed due to the record 43-day government shutdown, is likely to show the opposite once released. “The labor market remains weak, near stagnation.” Meanwhile, inflation has not risen significantly in recent months. He stated that the economic slowdown and high interest rates have dampened consumer spending, thus helping to control inflation. "Given signs of slowing economic growth and a weak labor market that could lead to modest wage growth, I don't see anything that could cause inflation to accelerate." Michael S. Barr, Federal Reserve Governor: Cautious Rate Cuts On November 20, Michael Barr stated, "I'm concerned that inflation is still around 3%, while our target is 2%. So we need to be cautious with monetary policy now, as we want to ensure we achieve both ends of our mandate." Lisa D. Cook, Federal Reserve Governor: Uncertain Cook, in an interview with the Brookings Institution in Washington, stated, "At each meeting, I base my monetary policy stance on the latest data from various sources, changes in my expectations, and the balance of risks. Every meeting, including the December meeting, has been in person." "Philip N. Jefferson, Federal Reserve Governor: Uncertain
On November 17, Jefferson pointed out that as the Federal Reserve has eased policy to a point where it may halt the slowdown in inflation, it needs to proceed "slowly" on the issue of further rate cuts. "In recent months, I think the balance of risks in the economy has shifted, with downside risks to employment increasing relative to upside risks to inflation, while upside risks to inflation may have recently decreased." Jefferson will be data-driven and will take a "meeting-by-meeting" approach to policy decisions. "At this point in time, this is a particularly prudent approach."
Philip N. Jefferson, Federal Reserve Governor: Uncertain
On November 17, Jefferson noted that as the Federal Reserve eases policy to a point where it may halt the slowdown in inflation, it needs to proceed "slowly" on the issue of further rate cuts. "In recent months, I think the balance of risks in the economy has shifted, with downside risks to employment increasing relative to upside risks to inflation, while upside risks to inflation may have recently decreased." Jefferson will be data-driven and will take a "meeting-by-meeting" approach to policy decisions. "This is a particularly prudent approach at this point in time."
Philip N. Jefferson, Federal Reserve Governor: Uncertain
"Ahead of the December Fed policy meeting, 'it remains unclear how much official data we can expect.'" (2025 Rotating Voting Members (Regional Fed Presidents)) On November 12, Collins stated that due to concerns about high inflation, she believes the threshold for further monetary easing in the near term is "relatively high." "I would not easily ease policy without clear evidence of a deteriorating labor market, especially given the limited inflation information resulting from the government shutdown. In the current highly uncertain environment, maintaining the policy rate at its current level for some time may be appropriate to balance inflation and employment risks." Alberto G. Musalem, President of the Federal Reserve Bank of St. Louis: Inclined Towards No Rate Cuts On November 10, Musalem expressed clear skepticism about the prospect of further monetary easing. In a media interview, he stated, "It is crucial that we proceed with caution at this moment. I believe there is very limited room for further easing without making policy overly loose." Musalem believes that current inflation is closer to 3%, rather than the Fed's 2% target. He added that financial conditions, including stock valuations and housing prices, are already high; monetary policy is closer to neutral than mildly restrictive; and the labor market has cooled in an orderly manner. "I think we need to continue taking measures to curb inflation." Jeffrey R. Schmid, President of the Kansas City Federal Reserve: Inclined Towards No Rate Cuts
On November 14, Schmid stated that further rate cuts might have a greater effect on reinforcing high inflation than on supporting the labor market: "I don't think further rate cuts will do much to mend the cracks in the labor market—these pressures are more likely to come from structural changes in technology and immigration policies. However, rate cuts could have a more lasting impact on inflation because it would raise increasing questions about our commitment to the 2% inflation target."
Jeffrey R. Schmid, President of the Kansas City Federal Reserve: Inclined Towards No Rate Cuts
On November 14, Schmid stated that further rate cuts might have a greater effect on reinforcing high inflation than on supporting the labor market: "I don't think further rate cuts will do much to mend the cracks in the labor market—these pressures are more likely to come from structural changes in technology and immigration policies. However, rate cuts could have a more lasting effect on inflation because it would raise increasing questions about our commitment to the 2% inflation target.
Jeffrey R. Schmid, President of the Kansas City Federal Reserve: Inclined Towards No Rate Cuts
This reasoning is guiding his thinking about the upcoming December Federal Reserve policy meeting, he added, adding that he remains open to new information in the coming weeks.
Austan D. Goolsbee, Chicago Fed President: Cautious Rate Cuts
Goulsbee stated at an event hosted by the Indianapolis Institute of Financial Analysts that the process of inflation returning to 2% "seems to have stalled." "This makes me a little uneasy."
Goulsbee said at an event hosted by the Indianapolis Institute of Financial Analysts that the process of inflation returning to 2% "seems to have stalled." "This makes me a little uneasy."
In summary, four of the 12 voters clearly favored a rate cut, while the other eight were undecided or opposed to a rate cut.
III. External Expectations for a December Rate Cut by the Federal Reserve
Barclays research points out that the Federal Reserve's interest rate decision next month remains uncertain, but Chairman Powell is likely to push the FOMC to make a rate cut decision. Based on recent speeches, Barclays believes that Governors Milan, Bowman, and Waller may support a rate cut, while regional Fed Presidents Mussallem and Schmid tend to keep rates unchanged. The latest statements from Governors Barr and Jefferson, as well as Goolsby and Collins, indicate that their stance is not yet clear, but they are more inclined to maintain the status quo. Governors Cook and Williams rely on data but seem to be more supportive of a rate cut. Barclays stated: "This means that before considering Powell's position, there may be six voters who prefer to keep rates unchanged and five who prefer a rate cut." The bank added that Powell will ultimately lead the decision because the threshold for governors to publicly oppose his position is very high. A research report from CITIC Securities stated that New York Fed President Williams hinted at a further rate cut in December, reversing market expectations for a rate cut. Currently, the market believes there is a 70% probability of a Fed rate cut in December. The Fed will enter a blackout period on November 29th. Before this period, Powell has no scheduled public speeches or media interviews. The speech by his "close ally," Williams, may be the last Fed official speech to influence market expectations. Continuing the previous view, a "close call" rate cut of 25 basis points is expected in December. For the market, the reversal of rate cut expectations, coupled with the progress of the "28-point" plan and news that the Trump administration is considering exporting H200 chips to China, means that macroeconomic factors are no longer a source of market pressure in the short term. The market may focus more on issues such as AI company bond issuance and cryptocurrency trends. Polymarket predicts the probability of a 25 basis point rate cut by the Federal Reserve in December has risen to 67%.
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