We now expect the Fed to close out 2025 with a final 25bps cut. Our earlier call of a Dec hold in absence of macro data had to change after New York Fed Williams comments on 21st Nov which tilted the market pricing in favour of a Dec cut. But this decision will not be unanimous and is likely to feature dissents in both a hawkish and dovish direction. We expect five out of the twelve FOMC members to dissent, with four hawkish dissents against the decision to cut rates (Schmid, Musalem, Goolsbee, and Collins). We also expect Governor Miran to dissent dovishly in favor of a 50bp cut. Powell & a handful of close allies will likely be the swing votes at this meeting. There has been no clear pushback from Powell against the likelihood of a cut raising the probability that he supports additional easing next week. To forge as much consensus for the 25bp rate cut, and thus minimize dissents, we anticipate the statement and Chair Powell’s press conference will signal that the hurdle is relatively high for another cut in early 2026. We believe the December cut will be the final cut with Powell as Fed chair. We now see cuts in June and September 2026 under the next chair. The dot plot is likely to show even greater “tacit dissent,” with 8-9 officials likely to submit a 2025 dot of 3.875% (signalling they preferred no cut at this meeting). The dot plot and economic projections are unlikely to change significantly. We expect the median dot to show one cut per year in 2026 and 2027, with the terminal rate unchanged at 3.125%. On the state of US economy it has been a mixed bag. While UR increased to 4.4% in Sep NFP & ADP private employment contracted 32k in November, weekly initial jobless claims have been subdued. In economic conditions, business surveys have been solid seen in above average PMIs. To summarise, the meeting statement will likely adjust its forward guidance language to imply future cuts are not a given or that the pace of easing is likely to slow. From a market perspective, we expect DXY to strengthen post FOMC on 10th Dec as well as US yield curve to shift higher before the NFP data release on 16th Dec and CPI release on 18th Dec. Our trade reco published on 9th Nov on 10yr UST yield is still active and we are expecting 4.3 levels from the reco yield level of 4.08. Current yield is 4.13. https://macro-spectrum.com/trade-recommendation/sell-10yr-ust US equities might still rise as FOMC description of US economy might remain solid which do not require rate cuts in short term. We are expecting 7000 on S&P 500 by year end as our below trade reco published on 8th Nov: https://macro-spectrum.com/trade-recommendation/buy-sp-500
