Will the Federal Reserve Rate Cut Happen? Sharp FOMC Divide Puts Powell Under Pressure

Federal Reserve rate cut: The Federal Reserve is heading into one of its most contentious policy meetings in years, as Chair Jerome Powell attempts to secure enough support for a third consecutive interest rate cut. The 19-member Federal Open Market Committee (FOMC) is sharply fractured reflecting an economy sending mixed signals and a lack of official data due to the ongoing federal shutdown.

Inflation remains elevated, typically an argument against rate cuts. But hiring has weakened for months, unemployment has climbed to a four-year high, and major companies have launched sweeping layoffs factors that generally justify easing monetary policy.

Economists say as many as three Fed officials could dissent against the expected quarter-point cut at the Dec. 9–10 meeting, potentially marking the most internal disagreement in six years. Only 12 of the 19 members vote, but several non-voting officials have also publicly opposed another rate reduction.

“This is just a really tricky time,” said William English, former senior Fed economist and Yale professor. “Reasonable people can reach different conclusions, and consensus is unusually hard to find.”

A Preview of the Post-Powell Fed?

The debate may foreshadow what’s coming after Powell’s term ends in May. President Donald Trump is widely expected to nominate White House economic adviser Kevin Hassett who favors deeper and faster cuts to replace him. That shift could amplify ideological divisions inside the Fed.

Some analysts say a fragmented committee isn’t necessarily bad, arguing it reflects healthy debate after years of criticism over “groupthink.” But others warn that 7–5 or 8–4 votes could hurt financial-market confidence if policy direction appears unstable.

Fed Governor Christopher Waller has cautioned that a single vote swing in such a close split could dramatically shift policy expectations.

A “Hawkish Cut” Expected

Most economists now anticipate a “hawkish cut”a reduction paired with strong guidance that the Fed may pause afterward. Kansas City Fed President Jeffrey Schmid is expected to dissent, favoring no cut. St. Louis Fed President Alberto Musalem may join him. Fed Governor Stephen Miran, appointed in September, is likely to dissent again—but calling for a larger half-point cut.

The outlook changed dramatically after New York Fed President John Williams said that 2025’s inflation increase was likely temporary and driven by Trump’s tariffs. As one of Powell’s closest allies and a permanent voter, his comments sent market expectations of a rate cut soaring to 89%, according to CME FedWatch.

“You’re seeing the power of the chair,” said Nathan Sheets, Citi’s chief global economist. “Members of the committee are signaling their support for Powell.”

Jobs Data Missing, But Warning Signs Flashing

Official jobs and inflation reports remain delayed, but early indicators suggest a weakening labor market:

• Unemployment has climbed to 4.4%, the highest in four years.

• ADP data shows U.S. companies shed 32,000 jobs in November.

• Multiple major corporations have announced mass layoffs.

These concerns favor a December cut, but Fed officials will review months of backlogged data at their late-January meeting data that could either validate or undermine the case for further cuts.

“What they may end up doing is cutting now but signaling that they’re on pause afterward,” said Kathy Bostjancic, chief economist at Nationwide.

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