Market News Today: Fed Rate-Cut Odds Surge Above 70% After Williams’ Remark Signals Policy Shift

Market expectations for a Federal Reserve interest-rate cut on December 10 have surged above 70%, after New York Fed President John Williams — one of Jerome Powell’s closest policy allies — publicly stated that the central bank still has room to “adjust rates further in the near term.” The remarks sharply reversed weeks of skepticism fueled by internal disagreements among Fed officials and rising concerns over persistent inflation.For the past month, investors doubted whether the Federal Open Market Committee (FOMC) had enough consensus to deliver another cut. But a series of dovish signals from the Fed’s most influential policymakers has dramatically shifted sentiment.Labor Market Weakness Becomes Central Justification for a CutEconomists say the deteriorating labor market now provides the clearest rationale for a December cut.Unemployment rose to 4.4% in September, the highest in nearly four years.Early data following the government shutdown shows slowing hiring and rising signs of stress in sectors previously viewed as stable.“This labor market deterioration is a reasonable justification for a rate cut in December,” said Wells Fargo chief economist Tom Porcelli.Deutsche Bank’s chief U.S. economist Matthew Luzzetti echoed the concern, calling the job market “in a precarious state.”Williams’ Remarks Trigger a Market RepricingThe turning point came when New York Fed President John Williams — often considered part of the Fed’s “Big Three” alongside Powell and Vice Chair Philip Jefferson — openly supported further rate adjustments:“I still believe there is room for further adjustments to interest rates in the near term,” Williams said last Friday.Markets immediately reacted.Odds of a December rate cut jumped from 39% to over 70% in 24 hours, according to CME FedWatch.Vanguard senior economist Josh Hirt said Williams’ statement was the decisive signal:“Powell, Williams, and Governor Waller now form a very powerful pro-cut camp.”Economists widely interpret Williams’ remarks as a message cleared at the highest level of the Fed.Evercore ISI’s Krishna Guha noted that when a top official uses the phrase “in the short term,” it almost always refers to the next FOMC meeting.Why the Fed’s Internal Disagreements PersistDespite the strong shift toward rate-cut expectations, the December vote will likely not be unanimous. Several officials remain hesitant:Boston Fed President Susan Collins has expressed concerns about persistent inflation.Dallas Fed President Lorie Logan suggested she may not have supported the previous two rate cuts.Some policymakers argue financial conditions have already loosened via strong equity markets.Former Cleveland Fed President Loretta Mester highlighted that the Fed faces an “impossible challenge”: navigating a mix of higher unemployment and still-elevated inflation, a dynamic resembling mild stagflation.Economists outline three core disputes inside the FOMC:Is policy tight or loose?Some say markets suggest policy is already easing; others point to housing and credit markets that remain tight.How should inflation be interpreted?The pro-cut camp says tariff-related distortions are masking underlying disinflation; hawks point to sticky inflation in non-tariff sectors.Why is weak hiring coexisting with strong consumer spending?Officials admit this paradox complicates policy signals.A High-Stakes Decision Made in a ‘Data Vacuum’A rare complication: because of the prolonged government shutdown, the Fed will not have updated employment or inflation data for the December meeting.This means policymakers will be forced to make their most consequential decision of the year with incomplete information.Mester said Powell may frame the December cut as an “insurance cut”—a precautionary move to soften economic momentum while watching how the economy responds.Why This Shift MattersA December rate cut would mark a major pivot in the Fed’s narrative and could reshape expectations for:bonds and equitiescredit marketshousingcryptocurrencies, which historically react strongly to easing cyclesEconomists say that with Powell, Williams, and Waller aligned, the probability of a December cut is now “highly probable” unless unexpected new risks emerge.