The Federal Reserve arrives at its December meeting with a familiar headline and an unfamiliar handicap: officials are widely expected to shave a quarter-point from the policy rate this week, but they’ll do it with key economic readings still missing after a 43-day government shutdown.
That absence of fresh data has pushed the open-market committee into an unusually opaque, debate-driven moment. With job growth cooling, layoffs rising in some sectors and inflation stubbornly above target, policymakers must choose which risks to prioritize — and several are openly divided about the right answer.
A likely quarter-point cut — and some dissent
Financial markets put heavy odds on a 25-basis-point move. Futures pricing suggests the Fed funds rate would fall into a 3.75%–4% range if the committee follows through. For many officials, a modest cut is insurance against a labor market that has shown signs of strain: private-sector hiring has weakened, layoffs are up compared with last year, and employers are increasingly cautious.
Still, this is not a unanimous decision. The October meeting saw two dissents — the most political friction the committee has shown in years — and more pushback is expected. Fed governor Stephen Miran has signaled he favors larger, faster cuts and could dissent if the committee moves only a quarter-point. On the other side, several regional presidents and a handful of governors remain wary of easing too quickly while core inflation measures sit above the Fed’s 2% goal.
Flying blind: the data the Fed won’t see until after the vote
The shutdown’s pause of government data releases leaves the Fed without November hiring figures and the latest consumer-price measures — two inputs the central bank prizes. The Fed’s preferred inflation gauge, the core personal consumption expenditures index, recorded a 2.8% year-over-year increase in September; without newer numbers, officials are effectively debating policy on lagging information.
That vacuum has made speeches and philosophy more influential. Officials who prioritize the employment side of the Fed’s dual mandate have leaned harder toward easing; those fixated on price stability have pushed back, worried that looser policy could rekindle inflation pressures.
Federal Reserve Chair Jerome Powell has repeatedly cautioned that a December cut was "not a foregone conclusion," language he’s likely to repeat at his post-meeting news conference. What he says next will be parsed for clues about the timing and scale of any future moves.
Where the labor market fits in — and where AI comes into play
The labor market is the flashpoint. Official payrolls showed a modest rebound in September, with 119,000 jobs added and unemployment creeping up to 4.4% — still low by historical standards, but the highest in four years. Private-sector indicators tell a grimmer story: layoffs have ticked higher and hiring plans have cooled.
Economists and strategists point to structural forces that could keep hiring soft, including broader adoption of artificial intelligence that makes some roles redundant or shifts how companies staff up. That technological shake-up has already prompted firms in other industries to automate parts of their operations; for an example of corporate automation trends, see how gaming companies are retooling quality assurance roles as they embrace AI-driven workflows Square Enix’s AI push. On the tools side, consumer and workplace apps are getting smarter fast — for instance, Google’s navigation and assistant features are adding more AI capabilities that change how small teams operate Google Maps’ Gemini copilot.
If employers continue trimming labor in favor of AI-driven efficiency, that would strengthen the case for additional easing next year. But if consumer demand revives quickly once borrowing costs fall, inflation could reaccelerate, forcing the Fed to reverse course.
Politics, leadership and the next chapter
Monetary policy is never entirely immune to politics, and this cycle has been unusually public. President Trump and White House allies have pushed for faster cuts; that pressure grew louder after Powell’s more cautious framing earlier in the year. Powell’s term ends next year, and the White House has signaled it will move quickly to name a successor — reportedly considering Kevin Hassett among others — a change that could shift the Committee’s temperament.
Whatever the Fed does this week, many economists expect further easing in 2026 — perhaps two more cuts — though the timing is uncertain. Some forecasts place a pause in early January, with the committee reassessing as fresh data arrive; others say the first additional moves might not come until March.
This meeting is therefore less about an inevitable policy pivot and more about which risks the Federal Open Market Committee chooses to live with until the fog clears: a slightly weaker labor market, or the chance that cheaper credit breathes new life into an inflation problem that has been slow to die.
For markets, businesses and consumers, the immediate effects of a 25-basis-point reduction are tangible — lower borrowing costs on some loans and a modest relief for households feeling squeezed by rising everyday prices. For policymakers, the decision is an exercise in judgment under uncertainty. Expect a contested vote, careful language, and a series of follow-up signals rather than a bold roadmap.