Federal Reserve Poised to Cut Interest Rates Despite Growing Disagreement from Pro-Expressive and Pro-Expressive Camps
The United States Federal Reserve (Fed) will announce its interest rate decision on Wednesday, with markets widely expecting the central bank to deliver a final 25 bps cut for 2025. While this move has been widely anticipated, it may be overshadowed by the vote itself, as dissent within the Committee is anticipated from the E-Expressive and Pro-Expressive camps.
Along with its interest rate decision, the Fed will also release its Statement on Monetary Policy, along with a revised Summary of Economic Projections (SEP), following its December policy meeting on Wednesday.
The CME FedWatch tool shows that investors are pricing in about a 90% chance of a 25 bps cut in December to a range of 3.5%-3.75%, but see a high probability of policy being maintained in January. The latest SEP report, published in September, showed that policymakers' projections implied a 25-bps rate cut in 2026.
According to a recent Reuters poll, 89 of 108 economists expect the Fed to opt for a 25-bps cut in December. Furthermore, half of the economists surveyed see the US central bank cutting its policy rate by another 25 bps to a range of 3.25%-3.5% in the first quarter of 2026.
While economists expect modest revisions to their growth and inflation projections, market attention will be focused on Fed Chair Jerome Powell's words and tone, which will attempt to reflect the dissenting views of the deeply divided committee.
In the post-meeting press conference, Powell will likely also be asked about his potential successor next year, US President Donald Trump's top economic adviser, Kevin Hassett. Markets expect Hassett to steer policy toward a more lenient stance if selected as the new chair.
TD Securities analysts expect the Fed to adopt a more hawkish tone after cutting the policy rate.
"We expect the FOMC to cut another 25bp. The decision to stay on the easing path will be as controversial as, or even more so than, October's, and we expect the final rate cut of the year to yield significantly more hawkish guidance. We expect the Board as a whole to fully support the decision to ease policy in December, while hawkish regional Fed presidents will likely dissent," they explained. (alg)
Source: FXstreet
