US stocks rebound on renewed hopes of Fed rate cut in Dec’25

 

·         Fed’s VC and influential Williams unexpectedly turned from centrist to uber dovish in a matter of two weeks and indicated a 25 bps rate cut in Dec'25

·         But despite Williams, Waller & Miran’s rate cut pivot, they are clearly in the dovish minority camp in FOMC

·         Fed may not cut in Dec’25 as most of the FOMC participants are now more worried over elevated core inflation (3.00% vs 2.00% TGT) than modest uptick in unemployment (4.3% vs 3.8% TGT)

·         Fed is also viewing 4.00% as the minimum unemployment rate and may digest up to 4.5-5.0% unemployment rate to bring down core inflation back to the target over the medium-long term

Wall Street futures were under pressure last week on fading hopes of another Fed rate cut in December '25 despite an apparent blockbuster report card by AI king NVIDIA. But NVIDIA also stumbled from an earnings surge as the fine print of the earnings revealed sophisticated financial engineering. Also, there are issues with the Chinese market. China is not ready to buy any US-manufactured chips, even though they are high-end from NVIDIA. China is now almost at par with the US in sophisticated AI chips manufacturing and thus does not have to be hostile to Trump's morning mood, Truths, constant bullying tactics, and uncertain chaotic policies.

On Friday, November 21, Wall Street Futures sharply rebounded on renewed hopes of another rate cut in December '25 after influential Fed policymaker Williams (NY Fed President) sounded unexpectedly dovish in his prepared speech. Williams, often seen as Chair Powell's 'right-hand man' and an influential member of his core team, suggested policy may have room to move closer to neutral. Subsequently, the Fed rate cut probability surged from below 40% last week to almost 70%, and stimulus addicted Wall Street surged.

Relevant text of speech by the NY Fed President Williams at the Central Bank of Chile Centennial Conference, Santiago, on November 21, 2025

Navigating Unpredictable Terrain-Inflation targeting

The Current Situation

“I'll comment briefly on the current economic situation in the U.S. and what it means for monetary policy. Economic growth has slowed from its pace last year, and the labor market has gradually cooled. In particular, indicators of the balance between labor demand and supply, including the unemployment rate, have gradually softened over the past year, reaching levels seen before the pandemic when the labor market was not overheated. I would emphasize that this has been an ongoing, gradual process, without signs of a significant rise in layoffs or other indications of a sharp deterioration in the labor market.

Inflation declined from a peak of 7-1/4 percent in mid-2022 to 2-3/4 percent in 2024. Looking back at FOMC participants’ projections in December of last year, the median expectation was for inflation to slow to 2-1/2 percent this year and approach 2 percent next year. Since then, the effects of trade policies and other developments have boosted U.S. inflation somewhat, offsetting the expected downward trajectory. As a result, progress toward our 2 percent goal has temporarily stalled, with the latest available data indicating that inflation remains around 2-3/4 percent.

It is not possible to measure the effects of trade policy actions on inflation with precision. I estimate that increased tariffs have contributed about one-half to three-quarters of a percentage point to the current inflation rate. I do not see any signs of tariffs contributing to second-round or other spillover effects on inflation. In particular, inflation expectations are very well anchored, no broad-based supply chain bottlenecks have emerged, labor markets are not creating inflationary pressures, and wage growth has moderated. As a result, I expect the effects of tariffs on inflation will play out over the rest of this year and the first half of next year. Inflation should thereafter get back on track to 2 percent in 2027.

Given this backdrop, monetary policy is very focused on balancing the downside risks to our maximum employment goal and the upside risks to price stability. My assessment is that the downside risks to employment have increased as the labor market has cooled, while the upside risks to inflation have lessened somewhat. Underlying inflation continues to trend downward, absent any evidence of second-round effects emanating from tariffs. For these reasons, I fully supported the FOMC’s decisions to reduce the target range for the federal funds rate by 25 basis points at each of its past two meetings.

Looking ahead, it is imperative to restore inflation to our 2 percent longer-run goal on a sustained basis. It is equally important to do so without creating undue risks to our maximum employment goal. I view monetary policy as being modestly restrictive, although somewhat less so than before our recent actions. Therefore, I still see room for further adjustment in the near term to the target range for the federal funds rate to move the stance of policy closer to the range of neutral, thereby maintaining the balance between the achievements of our two goals. My policy views will, as always, be based on the evolution of the totality of the data, the economic outlook, and the balance of risks to the achievement of our maximum employment and price stability goals.”

Highlights of comments by Fed’s Williams: November 21, 2025-Suddenly tuned ultra-dovish

·         AI's impact on labor is similar to the prior hollowing out of blue-collar jobs, and it will change what skills are marketable

·         Employers are very cautious about hiring new employees

·         I don't see AI changing the natural rate of unemployment

·         2% inflation target is still a very useful place to be

·         Fed policy is modestly restrictive

·         The labor market has been cooling for over two years now, with demand for labor softening and the unemployment rate rising.

·         I don't see us broadly trying to limit volatility.

·         The Fed does influence rates and volatility in short-term markets as part of monetary policy.

·         It's healthy for markets to determine valuations.

·         Financial markets set asset prices; the Fed does not have a view on whether they are too high or too low.

·         We don't have insights into whether the market is overvalued

·         History tells us not to over-index for the last 5 years

·         Inflation targeting is well designed for supply shocks

·         Survey evidence is very valuable in the absence of BLS data

·         Surveys provide better information when the questions are about individual circumstances, not bigger issues

·         It's important to have accurate & reliable data sources

·         Swap lines are for both the US and the counterparties

·         Swap lines are seen as a tool that contributes to well-functioning markets

·         Globally, we're still in a low neutral rate world

·         Fiscal policy may be boosting the neutral by 25-50 bps

·         I expect roughly trend growth this year and next

·         We're getting supply shocks as well as demand ones

·         Fiscal changes will boost growth over the next year

·         I don't like the notion of a short-run neutral rate

·         No question that Treasuries are the heart of the global finance system

·         We have not been on a sustainable fiscal path for a while

·         Clear communication can limit market disruption

·         Post-tariffs inflation is back on track to 2% in 2027

·         Tariffs are adding half to three-quarters of a percentage point (50-75 bps) to inflation

·         Downside risks to employment have increased

·         The Fed must meet its inflation target, but without undue risk to the maximum employment goal.

·         The labor market is now comparable to pre-pandemic years, when it was not overheated.

·         Economic growth has slowed, and the labor market has gradually cooled

·         Tariffs have increased prices, but are not expected to lead to persistent inflation

·         Disinflation progress has stalled, but should be on track to 2% in 2027

In brief, Williams views the current real rate ~1.00% (actual Fed REPO rate 4.00%-average core inflation rate 3.00%) as not neutral and somewhat less restrictive. Thus, Williams now may be advocating another 25 bps rate cut in December'25 for a repo rate at 3.75% and real REPO rate 0.75% as neutral rate (vs 0.50% pre-COVID), which will ensure a gradual decline in both core inflation and unemployment rate back towards targets by 2027. Fed needs 2.00% core inflation against the present 3MRA 3.00% and at least 3.8% unemployment rate (if not 3.5%) against the present average 4.3%.

Overall Tone: Moderately Dovish and Confident in the Framework:

Williams delivered one of the clearest signals yet from a senior and one of the most influential Fed policymakers that another 25 bps cut in December is appropriate and that the FOMC is likely to continue gradual easing into 2026.

Highlights of comments by Fed’s Williams: November 12/6

·         It is an inexact science to determine whether reserves are ample

·         The standing repo facility is effective and should be used when needed

·         Renewed balance sheet expansion is technical and not monetary policy

·         I am closely watching markets for liquidity signals

·         Standing repo facility can be used without stigma

·         It will not be long before reserves are at an ample level

·         We are probably in an era of bigger shocks; we have to manage through that

·         Now is a challenging time for monetary policy-making

·         The evidence is compelling that independent central banks make unpopular short-term decisions that pay off. Loss of central bank independence has had horrible consequences for inflation in other countries

·         There will be some issues with AI regarding the labor market

·         Large-scale AI investments in the US are affecting global demand for capital

·         Movements in data are much more important than Neutral Rate estimates in real-world policymaking

·         The Neutral Rate Model would say faster productivity boosts real rates

·         I think that the low neutral rate era is still with us

·         We still need to be focused on the effective lower bound

·         Model-based US neutral rate estimates are around 1%; the bond market suggests a higher neutral rate, but I would discount that

·         The natural rate of interest is hard to pin down

Highlights of comments by Fed’s Logan: November 21, 2025-Hawkish

·         Data centers will keep boosting electricity prices

·         I expect to resume the growth of the Fed balance sheet before long

·         The Fed should hold rates steady for a time to assess the degree of restriction

·         The Fed needs to offset tailwinds from financial conditions

·         Holding rates would allow the Fed to assess restrictions

·         The October rate cut was not warranted

·         Inflation is too high, and the labor market is roughly balanced

·         Would find it difficult to cut again in December

·         Elevated asset valuations and compressed credit spreads mean the policy rate must offset financial condition tailwinds.

·         The economy is benefiting from AI-related investment

·         It is not appropriate to deliver more preemptive insurance to the labor market via a rate cut

·         The labor market is cooling gradually, which is appropriate as we get inflation down

·         A modestly restrictive policy is still appropriate

·         I am focused on underlying inflation and its persistent

·         I am not seeing signs that core services, e.g., housing, are moving toward 2% inflation

·         We've missed our 2% inflation goal for over four years now

·         Inflation concerns are not just about tariffs

·         It looks like PCE inflation will end the year around 2.9%

·         The risks look more balanced than in September

·         There are risks to both employment and inflation

·         The labor market is cooling, but is roughly balanced

·         Inflation is too high, and is trending higher

·         I will be watching data and financial developments

·         For the December meeting, it would be hard to support another rate cut

·         I supported the September rate cut, but in October, I would have preferred to hold steady

·         If the recent rise in repo rates turns out not to be temporary, the Fed would need to begin buying assets (i.e., start the QE)

·         Layoffs and unemployment claims have stayed low, though I am mindful of recent layoff announcements

·         The breakeven payroll growth has likely fallen to 30,000 jobs per month

·         I did not see a need to cut rates this week; the economic outlook did not call for it

·         The labor market is roughly balanced, cooling slowly

·         TGCR and IORB spreads are central indicators of reserve supply

·         The time has come for the Fed to modernize the target rate

·         The size and timing of asset purchases shouldn't be mechanical

In summary, the Dallas Fed President Logan, a known hawk, and her overall comments suggest she will not support any rate cut in Dec '25, 25-even in her capacity as a non-voting FOMC participant in 2025.

Economic Uncertainty as Timeless and Timely

In her latest speech, Logan described economic uncertainty as a "pervasive feature of the macro-economy," relevant now due to an unclear outlook but inherent to policy-making. She emphasized that central banks must adapt strategies without overreacting, using tools like interest on reserve balances (IORB) to maintain efficiency in money markets. Recent money market shifts (e.g., tri-party general collateral rates averaging above IORB in late 2025) highlight the need for a steady reserve supply to track demand amid growth and regulatory changes.

Inflation and Labor Market Assessment

Inflation remains "too high," stalling progress toward the 2% target due to factors like tariffs and supply dynamics. Payroll gains have slowed markedly in 2025, but this reflects balanced labor supply and demand—declines in immigration and participation offset weaker hiring, creating no excess slack. Logan stressed the 2% target as the "more urgent" mandate currently.

Monetary Policy Stance

Policy should remain restrictive to gauge its true restrictiveness. Logan reiterated opposition to the October 25 BPS cut and stated she "cannot support" a December cut without faster disinflation or labor weakening. She advocated holding rates "for a time" to prioritize price stability, signaling a "higher-for-longer" path.

Policy Implications

Logan's remarks align with her broader hawkish profile, tempering market expectations for December easing (now ~70% priced in, down from recent peaks). They underscore divisions within the FOMC, contrasting dovish signals from influential FOMC participants like Williams. Upcoming data (e.g., Beige Book on Nov 26) will be pivotal, but Logan views current conditions as warranting patience to avoid undoing inflation gains.

Highlights of comments by Fed’s Collins: November 21/13, 2025 (Hawkish-Centrist)

·         More global economic fragmentation could lead to higher inflation

·         Global economic fragmentation could make the economy more volatile

·         Higher economic volatility could complicate the Fed's work

·         More economic fragmentation could raise borrowing costs.

·         I’m hesitant to get too far ahead with rate cuts while inflation is still high.

·         Over time, I expect we will lower rates further

·         Rate cuts already done have helped address risks

·         Financial conditions are accommodative

·         A range of views on the Fed is healthy

·         Resilient demand could put upward pressure on prices

·         I am hesitant to think about the next policy meeting

·         A mildly or moderately restrictive policy is appropriate

·         I expect growth to slow a bit later this year

·         Inflation remains elevated

·         The unemployment rate is still relatively low

·         The job market has clearly softened

·         Right now, with limited data, economic activity continues to be resilient

·         Wasn't surprised to see a rise in the September unemployment rate amid higher Labor Force participation

·         The September jobs report didn't change my view

·         The September jobs data was mixed

·         Dialing two notches down on rates made sense, given the risks

·         Elevated inflation warrants still mildly restrictive policy

·         Relatively high bar for additional easing in the near term

·         It is prudent to ensure inflation is durably on track to 2% before making any further policy rate cuts

·         Further monetary support to the activity runs the risk of slowing or stalling inflation's return to 2%

·         Fed policy is mildly restrictive. Financial conditions are a tailwind for growth

·         I expect a modest rise in the unemployment rate, tariffs to keep inflation elevated into early 2026

·         I have not seen an increase in downside employment risks since the Summer

·         Limited information on inflation due to the government shutdown

·         I am hesitant to ease policy further, absent notable labor-market deterioration

In summary, the Boston Fed President Collins, a known hawk/centrist, is not in favor of another consecutive 25 bps rate cut in December after two consecutive rate cuts (254 bps each) in September and October. Collins stressed more on disinflation as the US core inflation is now around 3.00% on average (3MRA), 100 bps higher than the target of 2.00%, while the unemployment rate is around 4.3%, almost 50 bps higher than the 3.8% potential Fed targets.

Economic Outlook

Collins characterized the U.S. economy as "resilient" overall, with solid growth and a softening but stable labor market amid mixed September hiring data but no sharp deterioration. But she is quite cautious about still elevated inflation due to Trump’s policy uncertainties and global fragmentation. Collins also outlined implications for business cycles and inflation in a "changing global landscape," stressing the need to balance dual-mandate risks without overreacting by the Fed.

Inflation Assessment

Collins sees Inflation remaining "elevated" and above the 2% target, with disinflation progress stalled due to Trump’s chaotic policies like tariffs. She views upside risks to inflation more than unemployment: "Given where inflation currently stands, restrictive policy is very appropriate right now”.

Monetary Policy Stance:

Collins views present monetary policy as "mildly restrictive" but "well-positioned" to achieve the Fed's dual mandate of minimum price stability and maximum employment. Collins expressed hesitation for additional cuts, calling the December decision a "closer call" and not a "foregone conclusion." She supported September & October rate cuts but sees a "relatively high bar" for more easing, prioritizing price stability. In the Friday CNBC interview, she added that the economy's strength "makes me hesitant as I look forward to thinking about what the next policy move should be. Collins reiterated balancing inflation upside and employment downside risks, open to dissent if needed in a fractious FOMC.

Policy Implications

Collins' cautious and hawkish comments reinforce Fed divisions, pulling back market odds for a December 25 bps cut to ~67% vs 70% post-Williams. This underscores the Fed's data-dependent approach, but the US government shutdown is delaying and also distorting economic data. Thus, Collins stressed "hold for some time", advocating patience to avoid policy mistakes.

Highlights of comments by Fed’s Goolsbee: 21/20/6 November 2025

·         The last three months of inflation were at best steady, by some measures worse.

·         Official government data is a mess, with more risk due to a lack of visibility on inflation than on the labor market, where there is more alternative data.

·         I am not hawkish when it comes to rates over the medium term

·         I believe rates will settle well below the current level (over the longer term)

·         September jobs data suggests stability, mild cooling

·         Unemployment claims do not show a rapid deterioration

·         When I voted for the Fed's October rate cut, I presumed the job market was cooling gradually

·         After the Fed's September rate cut, I felt just one more cut would be needed for 2025

·         If I end up feeling strongly and differently from other Fed policymakers, nothing wrong with dissenting

·         I see value in Fed Chair Powell's approach of trying to build consensus

·         A 50-year mortgage rate could make monetary policy decisions have less impact

·         The boom in data centres makes it a little harder to gauge where we are in the business cycle

·         AI investment raises concerns of a possible bubble

·         A low-hiring and low-firing environment is a sign of uncertainty

·         It's dubious that the slowdown in payrolls points to a recession

·         I wouldn't see the inflation side falling apart, possibly for months, which made me even more uneasy

·         There is a notable slowdown in the number of jobs created

·         I am uneasy about frontloading too many rate cuts and counting on transitory inflation

·         Official data is a big mess because the lights went out

·         Employment is near full employment

·         In the longer term, I believe rates can go down a full amount

·         Disinflation seems to have stalled

·         For inflation, we've set a 2% target, and 3% inflation is too high

·         If the government can tell the central bank what to do with interest rates, inflation rises, and growth is slower

·         I am not hawkish on rates in the medium term

·         The settling point for rates will be a fair bit below where it is today

·         I lean more to "when it's foggy, let's be careful and slow down"

·         For data to go dark right at the moment we saw services inflation rising is uncomfortable

·         Consumer spending and growth are strong

·         We can't count on inflation being transitory

·         There's very little private sector information about inflation; it will be some time before we see any problems.

·         I may be reluctant to continue the rate-cutting cycle

·         Low hiring and low firing are characteristic of an uncertain environment

·         Recession starts are not usually low hiring and low firing

·         There's a lot of stability

·         There's a little downside risk to the labor market

·         The unemployment rate is basically unchanged

·         Mild cooling in the labour market

·         We should be careful about taking the payroll job number drop as an indicator of the job market.

·         Most of the labour market indicators show stability in the market.

In summary, the Chicago Fed President Goolsbee, a known dove to centrist and a voting FOMC participant for 2025, sounded less dovish amid data fog due to the government shutdown saga and elevated inflation pressure. His comments underscore unease about "front-loading" easing without clearer evidence of disinflation, even after acknowledging gradual labor market softening.

Economic Outlook and Data Challenges

Goolsbee’s comments highlighted the economy's underlying strength but emphasized uncertainties from the shutdown, which has delayed critical inflation and jobs reports (e.g., November nonfarm payrolls). He noted the labor market shows signs of softening but remains balanced, with key metrics pointing to stability rather than deterioration. Goolsbee emphasized the delayed jobs report "definitely complicates" rate decisions, as private surveys can't be an alternative to official data fully.

Inflation Assessment

Goolsbee expressed concern over "too-high" inflation, particularly a recent uptick in services prices (tracked pre-shutdown), which he views as steady at best and potentially worsening. He worried about assuming this is transitory without more data, as reliable non-official sources are limited. "My unease is about the short-run front-loading of too many rate cuts and counting on the inflation uptick-- being transitory”.

Monetary Policy Stance

While supportive of the September and October 25 bps cuts to prevent labor weakening, Goolsbee is now "on the fence" for December, advocating a data-dependent approach tied to price pressures. He sees room for rates to "come down a fair amount" over 12–18 months, but prefers they align with falling inflation rather than preemptively. Goolsbee reiterated being "a little uneasy " about front-loading too many rate cuts in the near term. On November 21, he described 2024–2025 as a "critical moment" for the Fed, stressing the challenge of timing transitions amid unusual conditions. He added that dissenting is "nothing wrong with" if needed, signaling potential openness to a pause.

Policy Implications

Goolsbee's shift toward caution—contrasting his earlier dovish support for easing—reinforces FOMC divisions, slightly tempering market expectations for a December cut. His focus on services inflation and data voids aligns with hawks like Collins but maintains a long-term easing bias, prioritizing dual-mandate balance.

Highlights of comments by Fed’s Hammack: Hawkish camp

·         We are right around the neutral rate

·         I am looking at private credit a lot

·         I would like to see more usage of the standing repo facility

·         I expect to see fluctuations in money markets

·         In housing, input costs are a real issue

·         I had been anticipating a cooling in jobs, and the data is confirming that

·         We need to keep monetary policy somewhat restrictive due to inflation

·         Inflation is still too high, and is trending in the wrong direction

·         The Fed has to balance both sides of the mandate

·         I go into all Fed meetings with an open mind

·         Pressure from inflation is still really significant

·         Inflation expectations have been contained, and that's good

·         I see some softening in demand related to inflation

·         High inflation is still a real issue for the economy

·         Anecdotal info still points to a low-hire, low-fire environment

·         The jobs report is a bit stale, but it is in line with expectations

·         The jobs data highlighted challenges faced by monetary policy

·         The jobs data looked a bit mixed

·         I see elevated leverage levels in hedge funds, life insurers

·         Household finances are in good shape

·         Banks are well capitalized right now

·         Stablecoins and private credit merit watching

·         The financial system is in good shape

·         Financial conditions are ‘quite accommodative’ right now

·         Cutting rates now could distort market pricing levels

·         Cutting rates risks prolonging high inflation

·         Easing monetary policy now may encourage financial risk-taking

·         Risk management rate cuts could increase financial stability risks

·         Cuts could also encourage financial market risk-taking

·         Weakening of the dollar has brought it more in line with theoretical fair values

·         It will take quite some time for the Fed to get to all the Treasury holdings

·         It probably won't be too long before the Fed expands its balance sheet again due to technical factors

·         We want dealers to take advantage of the standing repo facility

·         Ample reserve levels allow for temporary money market rate swings

·         Expects firms to use the standing repo facility if it makes sense

·         There has been some pressure on the money market rates

·         Must reduce inflation to maintain the Fed's credibility

·         I expect above target inflation for two to three more years

·         It's not obvious that monetary policy should be doing more now

·         To maintain a restrictive policy, rates need to

be held at the current rates

·         The neutral rate has likely been trending upward

·         Seems the neutral rate has been rising in the recent past

·         Economic performance doesn't look like Fed policy is restraining it much

·         Monetary policy is currently barely restrictive, if at all

·         Time will tell if valuations for AI firms are right

·         It is too soon to say what will happen with AI

·         Right now, the job market looks balanced, but there are reasons for concern.

·         The labor market appears broadly balanced

·         I expect upward pressures on inflation into next year

·         The US economy has been remarkably resilient

·         Current unemployment is at its maximum level

·         Fed policy needs to remain somewhat restrictive to push inflation pressures down

·         The Inflation is still too high and moving up; the employment side of the Fed mandate is challenged amid job market softening

·         I hear from contacts that inflation is too high and moving in the wrong direction.

·         I am worried about the labor market

·         have high inflation sticking around

In brief, the Cleveland Fed President Hammack, a known hawk, continued his hawkish talks, emphasizing the risks of premature rate cuts amid persistent inflation above the 2% target.

Economic Outlook and Inflation Assessment

Hammack noted inflation has exceeded the Fed's 2% objective for four and a half years, with core PCE at 2.9% and headline at 2.7%, stalling progress due to tariffs and supply factors. She views upside risks as elevated, stating, "I remain concerned about high inflation and believe policy should be leaning against it." In her November 20 opening remarks, she underscored the financial system's resilience (well-capitalized banks, solid households) but warned of vulnerabilities from rapid technological change and economic shocks, referencing the pandemic's lessons: "You can never let your guard down."

Labor Market and Dual Mandate

Acknowledged a softening labor market (e.g., unemployment at 4.4%, payrolls averaging 119,000/month) but described it as balanced, not collapsing. She cautioned that easing to "ensure" jobs risks trade-offs, saying, "Lowering interest rates to support the labor market risks prolonging this period of elevated inflation." Financial markets are supporting growth, per her view, reducing urgency for cuts.

Monetary Policy Stance

Dissented against the October 25 BPS cut and opposes further easing, including December, as it could encourage "risk-taking in financial markets" and delay spotting weak practices, potentially amplifying future downturns. "We should be mindful that such insurance could come at the cost of heightened financial stability risks," she warned. Policy remains "mildly restrictive" and appropriate, with no 2025 cuts projected without clearer disinflation.

Policy Implications

Hammack's hawkish narrative reinforces FOMC divisions. Her focus on stability risks—less emphasized elsewhere—highlights broader vulnerabilities amid AI and trade uncertainties.

Since the week of November 1^st, after the last FOMC meeting, various Fed policymakers have delivered a series of speeches and public remarks amid ongoing debates over the U.S. economy's trajectory. Key themes include persistent inflation pressures (exacerbated by tariffs), a softening labor market, the impacts of the federal government shutdown on data availability, and the appropriate pace of monetary policy easing following the October 25 basis point rate cut. Policymakers remain divided: some advocate for a December rate cut to support employment, while others urge caution to ensure inflation sustainably returns to the 2% target.

The FOMC's next meeting is December 9-10, 2025, with market-implied odds of a 25 basis point cut rising to around 70% by November 22, largely due to dovish signals from the NY Fed President Williams; However, hawks like Boston Fed President Collins and Dallas Fed President Logan emphasize holding steady amid uncertainty.

Highlights of comments by Fed’s Barr: 20/12/6 November’25 (Centrist-Hawkish)

·         We need to be careful with monetary policy to balance risks

·         We need to support the labor market, but return inflation to 2%

·         I am concerned that inflation is still at 3%

·         AI is likely an overall positive, with near-term dislocation

·         The stock market is influencing the spending of wealthier consumers

·         AI is not yet translating into productivity gains

·         AI is generating significant gains in GDP

·         It's harder for the less well off to save; they're more at risk of shocks

·         I think that the low neutral rate era is still with us

·         We still need to be focused on the effective lower bound

·         The Neutral Rate Model would say faster productivity boosts real rates

·         The low-hiring part of the low-hire/low-fire environment may be showing some effect of AI adoption in some sectors

·         There is a big gap in the economy right now between the upper 40% and everyone else

·         It's harder for the less well-off to save; they're more at risk of shocks.

Highlights of comments by Fed’s Waller: 18/7 November 2025

·         The Fed needs a better reason than inflation having been above target for 5 years to not cut rates

·         Financial market looseness is not part of my mandate; I'm focused on inflation and the labor market

·         Monetary conditions are loose for corporate America, but not for ordinary households

·         Razor-thin votes can stop people from having confidence that the next vote will be

·         We might soon see the least amount of groupthink that you've seen from the Fed

·         A 25 bps rate cut won't get job growth back to where it was

·         I am hearing that firms are paying for AI investment by not hiring

·         We should be paying more attention to the labour market than the current inflation overshoot

·         Companies are starting to talk about more layoffs

·         It could be as short as a month or a couple of months before the balance sheet grows again.

·         I don't perceive the balance sheet staying where it is; natural reserve demand will push it up.

·         Our balance sheet is pretty much spot on.

·         Rates are creeping up in the markets, suggesting that we are close to scarce reserves

·         If we saw a rebound in the job market, there would be less need for insurance cuts

·         It is unlikely that any data, including the upcoming jobs report, would change the view that another rate cut is in order

·         Sour consumer sentiment lines up with reports from firms of slackening demand

·         The affordability of housing and cars poses an ongoing challenge for consumers, weighing on spending growth

·         Tariffs are a one-time price level shock. I don't see any factors that would cause acceleration in inflation

·         Inflation expectations are well-anchored\

·         Underlying US inflation is close to 2% target

·         The US labor market is weak and is near stall speed

·         I worry that restrictive monetary policy is weighing on the economy

·         A December rate cut will provide additional insurance on the labor market

·         I will support a quarter-percentage-point rate cut at the Fed's December 9th-10th meeting

Hawkish/Centrist FOMC voters, not in favor of another consecutive 25 bps rate cut in Dec’25

1. The St. Louis Fed President Musalem:

·         Cautioned that further rate cuts must be weighed carefully to avoid overly accommodative policy,

·         Given the limited room before inflation risks reemerge.

·         Noted tariffs could add 0.5-0.75 percentage points to inflation without second-round effects.

·         Expects inflation to trend back to 2% by 2027.

2. The Atlanta Fed President Bostic:

·         Highlighted dual mandate pressures: inflation above 2% for nearly five years, labor market slowing (unemployment at 4.4%).

·         Firms expect price growth of 3% in 2025-2026, with tariffs accounting for ~40% of cost increases, but broader pressures persisting.

·         Urged data-dependent decisions despite shutdown delays.

3. The Boston Fed President Collins:

·         Current policy is "mildly restrictive" and well-positioned to balance risks.

·         Downside employment risks have remained unchanged since the summer

·         Inflation is likely elevated through early 2026 due to tariffs.

·         Hesitant to ease further without clearer data, especially with shutdown gaps.

4. The Dallas Fed President Logan:

·         Reiterated the need to anchor inflation expectations

·         Policy remains restrictive

·         Labor cooling but not collapsing—wants more evidence before easing

·         Echoed concerns on tariff pass-through to price

5. The Kansas City Fed President Schmid:

·         Inflation ‘too hot’

·         Further cuts won't fix labor cracks and risk undoing progress

·         Dissented against the October cut; policy 'where it should be'

·         Expects no cuts in 2025 per dot plot

6. The Cleveland Fed President Hammack:

·         Inflation stalling or moving up

·         Dissented on the October cut

·         Watching hedge fund leverage and private credit risks

·         Predicts elevated inflation through 2025

·         Current stance is appropriate amid uncertainty

·         Watching inflation/labor challenges for stability

·         High inflation and softening jobs pose trade-offs.

·         Optimistic on tariff pass-through fading but elevated through 2025

·         Watching inflation/labor challenges for stability

·         High inflation and softening jobs pose trade-offs

·         Optimistic on tariff pass-through fading but elevated through 2025

7. Fed Governor Cook:

·         Financial system resilient (banks capitalized, households solid), but monitoring hedge fund leverage and private credit.

·         Risks of outsized asset price drops amid volatility

8. Fed Governor Barr: Centrist-Hawkish

9. Fed Governor: Bowman: Centrist-Hawkish

10. Fed’s Chair: Powell: Centrist-Hawkish

 

Centrist/Dovish FOMC voters, in favor of another consecutive 25 bps rate cut in Dec’25

1. Fed Governor Miran (Trump loyalist):

·         Inflation is falling faster than the data shows due to shutdown lags

·         Supports 50 bps December cut (or 25 bps minimum) for "incrementally more dovish" stance

·         Labor at "stall speed"

·         Tariffs are a one-time shock

·         Regulations should prioritize costs/benefits; resist overreaction post-crisis.

·         Tailor rules to insulate Treasury markets from stress.

·         Dissented for immediate QT end

2. Fed Governor Waller (Trump savvy; potential next Fed Chair):

·         Sees December 25 bps cut as "extra insurance" for labor market near "stall speed."

·         Core inflation (ex-tariffs) ~2%; no reacceleration risks

·         Tariffs add temporary pressure, but expectations are anchored

·         Economic activity not accelerating; aligns with weak labor data (e.g., 1M job cuts YTD).

·         Inflation ~3% but expectations are anchored

·         GDP growth is slowing ex-shutdown

3. Fed vice Chair Jefferson (Centrist): Open to cuts, but data dependent; not committed to the Dec'25 cut

·         Acknowledges board split, but no hawkish surprises expected.

·         Labor risks rising; supports gradual easing to avoid over-tightening

·         Welcomed QT end in December; reserves now ample

4. Fed’s Williams:

·         Open for another rate cut in Dec’25 to be closer to neutral and to stay ahead of the unemployment curve.

Summary: 2025 FOMC Committee Members (Voters)

Hawks/Centrists: May not vote for another 25 bps rate cut in Dec’25

·         Jerome H. Powell, Board of Governors, Chair: Hawk

·         Michael S. Barr, Board of Governors

·         Michelle W. Bowman, Board of Governors

·         Susan M. Collins, Boston

·         Lisa D. Cook, Board of Governors

·         Austan D. Goolsbee, Chicago

·         Alberto G. Musalem, St. Louis

·         Jeffrey R. Schmid, Kansas City

Doves/Centrist: May Vote for 25 another consecutive rate cut in Dec’25

·         John C. Williams, New York, Vice Chair (?) (50% probability)

·         Philip N. Jefferson, Board of Governors (?)

·         Stephen I. Miran, Board of Governors

·         Christopher J. Waller, Board of Governors (?)

Overall, the Fed is deeply divided, at least verbally; but even if we assume voting for Williams, Jefferson, and Waller in favor of another 25 bps rate cut in Dec'25 along with Miran (100%), the dovish (rate cut) camp will still be in the minority at 4 vs 8 of the hawkish camp (no cut). Waller also acknowledged that doves are clearly in the minority camp. Despite his dovish jawboning, Waller & Williams may not vote for another rate cut in Dec'25, if most of the other FOMC voters also refrained from another 'unnecessary' rate cut.

Trump's Latest Comments on Firing Fed Chair Jerome Powell

On November 19, 2025, during the speech at the U.S.-Saudi Investment Forum in Washington, D.C., President Trump escalated his long-standing criticism of Fed Chair Powell, explicitly stating he'd "love to fire his ass" for not lowering interest rates aggressively enough. Trump, frustrated with the Fed's cautious pace—despite two 25 basis point cuts in September and October that brought the federal funds rate to 3.75%-4.00%—accused Powell of being "grossly incompetent" and having "some real mental problems." He also blamed Powell for budget overruns on the Fed's headquarters renovation, claiming it would cost $4 billion (actual estimates: $2.5 billion). Trump said Powell should be fired for both ‘policy mistakes’ and ‘cost overrun”.

This marks a renewal of Trump's attacks, which had intensified in the spring of 2025 but cooled after advisor warnings about market chaos. Trump reiterated his desire for deeper cuts to stimulate growth amid voter concerns over affordability, like elevated mortgage rates (around 6.12% as of late October). Powell's term as chair ends in May 2026, though he could remain a governor until 2028; legal experts note firing him for policy disagreements would face court challenges, as "for cause" requires misconduct, not disputes.

Trump has not followed through on earlier threats (e.g., polling GOP lawmakers in July 2025), calling a firing "highly unlikely" then, but his November comments signal ongoing pressure ahead of the Fed's December 9-10 meeting, where markets are now pricing ~70% odds of another 25 bps cut (after Friday comments by Fed’s Williams) vs below 40% when Trump was speaking on November 19, 2025.

Scott Bessent's Support for Powell

Treasury Secretary Scott Bessent, a Wall Street veteran leading the search for Powell's successor, has actively advocated for Powell to complete his term, positioning himself as a "voice of reason" in Trump's inner circle. In disclosures during Trump's November 19 remarks, Trump mimicked Bessent pleading: "Sir, please don’t fire him. He’s got three months to go-- You’re very lucky you have him-- Done a good job." Bessent, who has no direct authority over the independent Fed, emphasized its autonomy in prior statements (e.g., September 2025: "The Fed should be independent... a cornerstone of US economic growth").

Trump responded by jokingly threatening to fire Bessent if rates don't fall faster: "The only thing Scott is blowing it on is the Fed--If you don't get it fixed fast, I'm going to fire your ass, okay?" Bessent, smiling onstage, took it in stride. Earlier, in July 2025, comments on X and at a Fed conference, Bessent called for an internal Fed review on regulations but stated there's "no reason" for Powell to step down now, supporting his full term to avoid disruption. Bessent is interviewing finalists for the next chair (potential announcement post-Thanksgiving), but has repeatedly declined interest in the role himself, preferring Treasury.

Conclusions

Fed Chair Powell and most of the other FOMC participants are clearly not in favor of another 25 bps back-to-back rate cut in December'25. The US core inflation is now hovering around 3.0% on an average (vs 2.0% targets) and unemployment rate 4.3% (vs 4.0% Fed comfort levels and 3.8% Fed target?); i.e. Fed needs to lower core inflation by at least 100 bps and unemployment rate 80 bps on a sustainable basis to achieve its dual mandate of maximum employment (as per current & evolving economic situations/labor market conditions) and minimum price stability. For this, the Fed has to keep the real rate at neutral levels or slightly above neutral levels (modestly restrictive) as the Fed needs to bring down core inflation by 100 bps vs unemployment 80 bps; i.e., the weightage of price stability mandate is more than maximum employment at present.

For the price stability mandate, the Fed now theoretically needs rate hikes to bring down the demand side of the economy to match constrained supply. But for the employment side of the mandate, the Fed also needs to cut rates moderately to prevent further economic slack. Thus, the Fed is now maintaining real policy rates at neutral levels; i.e. +1.0% from average core CPI inflation, which is 4.0% (vs 3.0% core CPI-3MRA); not restrictive (+1.50% from average core CPI) or accommodative (-0.50% from average core CPI). At 3.0% average core inflation, accommodative, neutral, and restrictive Fed repo rates will be 2.50%-4.00%-4.50% respectively.

But the Fed has no definitive neutral rate, at least publicly, like unemployment levels, so that it can change the 'goal post' as per evolving economic & financial conditions. At present, most of the FOMC participants are also of the view that at a 4.00% Fed REPO rate, the policy is slightly/modestly restrictive to ensure gradual disinflation. As core inflation target deviation (+100 bps) is more than unemployment (50-80 bps), the Fed is now prioritizing price stability mandate more than maximum employment.

Also, Fed’s ‘neutral rate guru’, the NY Fed President Williams, views the 4.00% REPO rate as slightly above neutral currently, considering the softening of the labor market. Thus, Williams suddenly turned dovish from a centrist/hawkish stance a few weeks ago. Williams may now be advocating another 25 bps 'insurance' rate cuts to ensure a soft landing. Williams may also be regarding + 0.75% as an ideal real rate (neutral) rather than +1.00% or +0.50% (pre-COVID). But the big question is whether the rest of the FOMC participants, including Chair Powell, now stand behind Williams or not. Eventually, this is a question of Fed unity amid Trump politics.

Overall, as a base case scenario, the Fed should cut 50 bps each in 2025 and 2026; but if US core inflation indeed surges further to 3.50% on average in 2026, it would be very difficult for the Fed to justify 50 bps rate cuts in 2026 even after assuming Trump’s tariff inflation is transient. And a potential new Fed leadership, loyal to Trumponomics and Trump’s ZRIP philosophy, may find it difficult to justify even 50 bps rate cuts in 2026.

At present, as the US economy is solid in terms of overall economic activities, there is an upside risk in both inflation and unemployment; i.e., there may be a stagflation-like scenario in 2026. Thus, the Fed has to wait for at least till H1CY26 for Trump policies, actual data & evolving outlook, and may not cut rates before September 26. Fed works on potential economic outlook, not actual data, to stay ahead of the curve. The weighted average Trump tariffs are now around 10% and the Fed has to wait to see the actual impact of Trump tariffs in 2026.

Despite Trump savvy potential next Fed Chair Williams (?) and Waller's pivot and advocacy for December'25 rate cuts, Waller & Co. is clearly in the minority camp. Trump's ultra-bullying tactics have made known Fed doves & hawks united behind Chair Powell, and thus Powell almost poured cold water on December'25 rate expectations with a hint of hawkish FOMC minutes. Fed may show another 50 bps rate cuts in 2026 in its December'25 dot-plots with a cautionary note.

Trump may stick to his flip-flop (bullying) negotiation tactics to get better tariff deals for the US, and he may continue this back & forth on tariffs till at least December 2025. Looking ahead, if, by early 2026, Trump's tariff policy does get clarity, then the Fed may modify its dot-plots in March'26 SEP and go for a 50 bps rate cut each in 2026-27 for a terminal rate of 3.00% by Dec'27 instead of Dec'28. As the present weakness in the US labor market is largely structural due to Trump policy uncertainty and AI issues, the Fed's rate cuts may not ensure higher employment; it's now a supply issue, rather than demand; the Fed's policy tool largely works on demand management, not supply.

Some Trump supporters are arguing that if the Fed cuts the rate further, then companies/businesses will borrow more to employ more people. But this is a bizarre idea. The US needs to impose a fair AI policy to ensure no harm in the labor market, while keeping corporate America in good shape. Trump also needs to ensure a middle ground in tariff policies to ensure price stability, considering the harsh reality on the ground.

Ahead of the Nov'26 mid-term election, the Trump admin should rectify its policy mistakes and focus more on core work, rather than engaging in 24/7 'Reality Shows' with monotonous nonsense talks. As of now, Trump is on the verge of losing the House in the Nov'26 mid-term election and also his Trifecta. This may push the US economy for more political & policy uncertainty, even paralysis, making the Fed's jobs more difficult. And US banks are now no longer extending easy credit amid a weak labor market, constrained real wage growth, higher cost of living, and rising NPA. Most of the US banks are now focusing on return of capital rather than return on capital and are only providing loans to quality borrowers. Thus, the Fed's rate cut may not help in higher lending; US banks are now investing more in bonds of the government & blue-chip corporates, ensuring risk-free assured return.

Bottom line:

Fed may not cut in December’25 despite Waller & Williams pivot. But the US economy may face an all-out recession in 2026 rather than stagflation amid increasing subprime/prime crisis (loan defaults/delinquencies, etc), Trump's chaotic policies, and a looming AI/Crypto bubble. Thus, the Fed may also go to almost ZIRP and QE-4 (?) in 2026 (as usual)- just after 5 years of the last GFC (global financial crisis-GFC).

Technical outlook: DJ-30, NQ-100, SPX-500 and Gold

Looking ahead, whatever may be the narrative, technically Dow Future (CMP: 46400) now has to sustain over 46700 for a further rally to 47000/47300*-48300/48500* and 49000/49500-49700/50000 in the coming days; otherwise sustaining below 46600, DJ-30 may fall to 46100/45700*-45300/4490* and 44200/44000-43500*/42150 in the coming days.

Similarly, NQ-100 Future (24300) now has to sustain over 24500 for a further rally to 24800/25000-25200/25400 and 26100-26500 in the coming days; otherwise, sustaining below 24350, NQ-100 may fall to 24200/24000*-23700/23400 23000 and 23000/22600-22400/21000 in the coming days.

Looking at the chart, technically SPX-500 (CMP: 6650) now has to sustain over 6550-6600 for a further rally to 6750/6850*-7000/7100 and 7200/7300-7500/8300 in the coming days; otherwise, sustaining below 6500, may further fall to 6490/6450-6375/6300-6250/6200 and further fall to 6080 in the coming days.

Looking at the chart, Technically Gold (CMP: $4060) has to sustain over 4085 for 4115-4155* and further  4175/4195-4300/4380 and to 4395-4405 for 4425/4455-4475/4500 to 4555-4575 and even 5000 zone in the coming days; otherwise sustaining below 4080-4075, Gold may again fall to 4040*/4020-4000/3970 and 3890/3875-3770/3740 and 3700/3600-3500/3450 and 3350 levels in the coming days.

 

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