The Federal Reserve walks into its December meeting with the feel of a jury room: opinions divided, tempers contained, and a decision that could reshape market expectations for months. Chair Jerome Powell is expected to back a 25 basis point cut to the federal funds rate at the Dec. 9-10 meeting, but the real story is the tension behind the vote.
Inflation is still stickier than some officials want, yet hiring has cooled and unemployment has ticked higher. That contradiction has left policymakers sharply split over whether another rate reduction is wise right now, or risky. Several officials — including some who do not vote this year — have signaled opposition to cutting further, while a small but vocal group favors either holding steady or cutting more aggressively.
A split decision
The Fed's rate-setting group includes 19 officials, though only 12 cast votes at any given meeting. Economists and Fed watchers say as many as three voting members could oppose the quarter-point move, which would mark the largest dissent in years. Names being mentioned in coverage include the Kansas City Fed president, who is expected to dissent for a second straight meeting, and others who want either no cut or a larger, half-point reduction.
What makes this meeting unusual is not simply disagreement, but the sharpness of it. The committee traditionally prizes consensus; long strings of near-unanimous decisions have been a hallmark. Now, with inflation and jobs pulling in opposite directions and recent government disruption delaying some official data, Fed officials are reaching different conclusions from the same patchy evidence.
John Williams, the New York Fed president and vice chair of the committee, has publicly suggested there is room for another adjustment to short-term rates, a comment market participants read as a signal of support for Powell. Traders have reacted: futures-implied odds for a 25 basis point cut sat in the high 80s this week, reflecting strong market conviction that the Fed will move.
Several Fed officials have discussed the idea of a so-called hawkish cut: trimming rates while simultaneously signaling a pause to assess incoming data. That would be a compromise – a way to address labor-market weakness while not encouraging markets to price in a rapid sequence of reductions.
Why markets care — and why tech is watching
Investors have made the Fed the central driver of U.S. stocks since the autumn. In 2025 the AI-fueled rally in big tech ran headlong into tariff-driven inflation blips and then the Fed's tightening and loosening cycles. A modest cut could be a boon to highly leveraged or capital-hungry sectors, notably the megacap tech companies that have been fueling much of the market's gains as they invest heavily in AI.
Those firms are sensitive to the path of interest rates: cheaper borrowing helps sustain massive AI investments and multiyear infrastructure projects. For context on how the AI wave is shaping the tech landscape, see recent developments like Microsoft's MAI-Image-1, and the steady rollout of AI features such as Google Maps' Gemini copilot, which underscore why a calmer monetary backdrop can matter so much to these businesses.
But markets are parsing more than the headline cut. Traders and strategists will zero in on the Fed's language. Will Powell and his colleagues say they expect to hold rates after the cut until they see clearer data, or will they leave the door open for a fast follow-up? Given data delays caused by the government shutdown, officials will have only a partial picture — and that uncertainty could be reflected in more cautious Fed communications.
Politics, personnel and the next chair
This meeting is also a preview of a transition. Powell's term as chair ends in May, and the White House is expected to nominate a successor. That has injected politics into what is normally a technocratic process. Some officials worry sharper splits could erode market confidence in the Fed's future course if votes come out 8-4 or 7-5.
Outside pressure has been loud. President Donald Trump has repeatedly criticized Powell, while an administration-nominated successor could shift the balance toward faster easing — a prospect some Fed officials resist.
Numbers and noise
Practical considerations are straightforward but consequential. The unemployment rate has moved up from its summer lows, and private payroll data from providers showed weakness in November. Meanwhile, inflation readings have remained elevated in some measures, meaning that a premature series of cuts risks reigniting price pressures.
Faced with this tug-of-war, expect the Fed to deliver a carefully worded decision: a likely 25 basis point cut coupled with language emphasizing data dependence and an openness to pause. Markets will quickly read the nuance, and that reading — more than the quarter-point itself — will determine whether stocks extend their recent rally or take a breather.
Powell will try to hold the committee together. Whether he can do it without splinters showing up in the vote is the question that will keep traders, CEOs, and economists watching closely as the Fed files out on Wednesday afternoon.