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New York Fed President John Williams has shifted market sentiment sharply, reviving expectations for a December interest rate cut after weeks of uncertainty. His latest remarks suggested the Federal Reserve still sees room to “adjust further in the near term” to bring policy closer to neutral. That single signal sent the probability of a December rate cut soaring to more than 70%, compared with just 30% the day before.
But despite the renewed optimism, analysts warn that a December cut is far from guaranteed. Fresh assessments from Scotiabank and Jefferies show that if the Federal Open Market Committee were to vote today, the outcome would likely be much closer than investors assume.
Scotiabank’s vote-weighted review of recent Fed speeches indicates an 8-1-2 breakdown: eight officials leaning toward a 25-basis-point cut, one supporting a larger 50-basis-point move, and two preferring to hold rates steady. Jefferies’ own analysis comes to a similar conclusion. The firm says the most probable outcome remains a quarter-point cut, but only by a slim margin, with the possibility of an unusual 7-5 split among voting members.
The divide reflects an ongoing debate inside the Fed about the true state of the U.S. economy. Policymakers favoring cuts argue that a cooling labor market warrants precautionary easing to prevent further economic slowdown. Meanwhile, the more hawkish members contend that inflation progress has stalled and that recent labor softness is clouded by temporary tariff-related uncertainty.
Recent data offers little clarity. The delayed September jobs report showed modest payroll growth but uneven hiring patterns, not enough to sway entrenched views. And with the November CPI and payroll reports scheduled for release only after the Dec. 9–10 meeting, policymakers may still be navigating incomplete information.
Jefferies notes that the minutes from the October meeting suggest growing agreement that rates are approaching neutral, though not quite there. That gap leaves room for another cut—but the path is narrow.
Both Jefferies and Scotiabank agree that a cut would likely pass if voted on today, though the razor-thin margin highlights how delicate the Fed’s easing consensus has become.
