12/10/2025
The last Federal Reserve meeting of the year is officially upon us, with central bankers from around the country convening in the nation’s capital to set the initial course of monetary policy for 2026.
A third consecutive interest rate cut by the Federal Open Market Committee (FOMC) on Wednesday is widely expected. As of Tuesday afternoon, CME FedWatch pegged the market-implied odds at 88% that a 25-basis-point cut to the benchmark federal funds rate is on tap.
A lackluster “low fire, low hire” labor market and cooling core inflation have seemingly sealed the deal on further easing. Less than a month ago, the Fed rate cut odds stood at 50-50 amid a government shutdown-induced data blackout.
But the number of dissents we may see from the 12-member FOMC is an open question.
“Should the committee cut as expected, the decision is likely to garner multiple dissents — possibly in both directions — as an increasingly divided Fed weighs upside inflation risks against rising employment concerns,” First American Senior Economist Sam Williamson wrote in commentary provided to Scotsman Guide.
The October FOMC meeting saw two formal dissents. Fed Governor Stephen Miran voted for a jumbo 50-basis-point cut, while Kansas City Fed President Jeffrey Schmid was in favor of maintaining the status quo.
The “strongly differing views” among FOMC members alluded to in the October meeting minutes were on display in post-meeting speeches and public appearances.
Some committee members, like regional Fed presidents Austan Goolsbee and Susan Collins, expressed uneasiness about further monetary easing. Others, like Fed Governor Christopher Waller, remain firmly entrenched in the rate-cut camp.
It has been six years since the FOMC has had three or more dissents at a meeting, and that has occurred only nine times since 1990, according to Reuters.
Potential mortgage rate impacts
Williamson believes that with Fed officials increasingly divided on policy, any further interest rate reductions will likely be a gradual process.
“That likely leaves 30-year mortgage rates hovering in the low-6% range,” he predicted, “drifting down only gradually, rather than snapping back to the 3%-4% levels of the last cycle.”
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The December meeting will also see an update to the Fed’s Summary of Economic Projections. Williamson noted that the median 2026 fed funds rate projection is expected to remain at 3.375%, which would indicate only one additional rate cut next year.
“However, significant dispersion in individual projections means even small revisions by a few participants could shift the 2026 median and spark outsized moves in market rate expectations,” he added.
Melissa Cohn, regional vice president of William Raveis Mortgage, cautioned that even if the Fed delivers the expected quarter-point rate cut, it doesn’t necessarily mean that mortgage rates are going to come down.
She commented that Fed Chair Jerome Powell’s post-meeting press conference will assume added significance in the wake of the data gap created by the federal government shutdown.
“The tone that Powell takes will drive rates one way or the other,” Cohn stated. “It’ll set the tone, as it always does, for the next month.”
Changing of the guard
The December FOMC summit may be Powell’s last meeting before his successor is announced. The current Fed chair’s term expires in May, and President Donald Trump has indicated he will likely reveal his selection “early next year.”
All signs are pointing to that pick being Kevin Hassett, the director of the National Economic Council who was a close economic adviser to Trump during the COVID-19 pandemic.
The betting sites Polymarket and Kalshi presently put the odds at roughly 70% that Hassett, a loyal supporter of the president’s policies, will prevail over Kevin Warsh, a former Fed governor who was considered the front-runner for the job earlier this year.
Hassett said during a Fox interview last week that while he expects the Fed to deliver a quarter-point cut in December, he wants to “get to a much lower rate” over the long run.
If Hassett takes the helm of the Federal Reserve in 2026, he will likely pressure the broader FOMC toward accelerated rate cuts. On the other hand, three of the rotating seats on the committee will be assumed by regional Fed presidents Beth Hammack, Neel Kashkari and Lorie Logan — all of whom have recently expressed caution about further rate cuts, citing stubbornly high inflation.
These diverging viewpoints will likely shape the Fed narrative in 2026, putting added pressure on Powell to project a unified tone at his remaining four meetings in the central bank’s top seat.
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