US Fed Faces 1983-Level Division Ahead of December Rate Cut... Surge in Dissenting Votes Feared

0.25 Percentage Point Cut Likely Due to Labor Market Slowdown
Inflation Concerns Persist as Hawks Raise Their Voices
Possibility of Five Dissenting Votes Emerges

This week, Wall Street is focused on the final Federal Open Market Committee (FOMC) meeting of the year by the United States Federal Reserve (Fed). Amid concerns over a slowdown in the labor market, there is a strong likelihood that the Fed will cut the benchmark interest rate by 0.25 percentage points. However, as inflation concerns have not been fully resolved, expectations are mounting that there will be multiple dissenting votes. Some observers predict that, for the first time since 1983, as many as five members could vote against the decision, fueling worries about internal division within the Fed.

Jerome Powell, Chairman of the United States Federal Reserve (Fed).

According to the Fed on December 7 (local time), the FOMC will hold its regular meeting on December 9-10 to determine the direction of the benchmark interest rate, which currently stands at 3.75-4.0% per annum.

The market overwhelmingly expects a 0.25 percentage point rate cut. According to CME FedWatch, the interest rate futures market is pricing in an 86.2% probability that the Fed will cut rates by 0.25 percentage points at this meeting. Economists also widely regard a rate cut as a foregone conclusion. In a joint survey conducted by the Financial Times (FT) and the University of Chicago Booth School's Clark Center, 85% of the 40 economists surveyed expected the Fed to cut rates by 0.25 percentage points due to concerns over a slowing labor market. The remaining 15% predicted a rate hold.

As a result, the Fed is likely to cut rates by 0.25 percentage points for three consecutive meetings-September, October, and December-for the first time this year. If the rate is lowered to 3.5-3.75% per annum, it will mark the lowest level in nearly three years.

The key issue is not whether the rate will be cut, but rather the number of dissenting votes. With inflation still above the Fed's 2% target and signs of a slowdown emerging in the labor market, the FOMC is becoming increasingly divided over whether to prioritize price stability or employment. In addition, the recent federal government shutdown, which resulted in gaps in major economic data, has further heightened uncertainty in policy decision-making.

There are significant differences in perspective among committee members. John Williams, President of the Federal Reserve Bank of New York, hinted last month at the possibility of a rate cut in response to potential labor market cooling. Christopher Waller, Fed Governor, and Michelle Bowman, Fed Vice Chair, also support a 0.25 percentage point rate cut. On the other hand, hawkish members remain firmly opposed. Jeff Schmid, President of the Federal Reserve Bank of Kansas City, is likely to advocate for holding rates steady; he also voted against a cut in October. Susan Collins, President of the Federal Reserve Bank of Boston, and Austan Goolsbee, President of the Federal Reserve Bank of Chicago, have also signaled the possibility of dissenting votes. Michael Barr, Fed Governor, has previously stated that there is little room for a rate cut. In addition, Steve Miran, Fed Governor and an economic advisor to President Donald Trump, is expected to vote against a 0.25 percentage point cut, as he has called for a larger 0.5 percentage point reduction. If there are five dissenting votes, it would be the first time since 1983; four dissenting votes would be the first since 1992.

Economists are also anticipating such divisions. In the FT survey, only one respondent expected all 12 FOMC voting members to unanimously support a 0.25 percentage point cut. Sixty percent of respondents expected two dissenting votes, while more than 30% anticipated three or more dissenting votes.

The so-called "dot plot," which shows the projected path of future interest rates, is also a key focus of this meeting. Even if a rate cut is implemented, there is a possibility that the dot plot will reflect a more hawkish outlook, indicating a slower pace of future cuts. According to the September dot plot, the median forecast among Fed officials was 3.625% for 2026 and 3.125% for 2027. If the Fed cuts rates this week and maintains these projections, there would be no rate cuts in 2026 and two cuts in 2027.

Bank of America (BofA) stated, "At least two dissenting votes are expected at this meeting," adding, "The fact that Jerome Powell, Chairman of the Fed, cannot firmly commit to holding rates steady may lead hawkish members within the FOMC to maintain an even more hardline stance."