A rate cut. That’s what to expect. Spoiler alert, I know.

The Fed will deliver a quarter-point reduction this week at its final policy gathering of 2025, bringing the total over three meetings to 75bps as (narrowly) foretold by the September dot plot.

Stephen Miran will almost surely dissent in favor of a larger, half-point cut just as he did in September and October. After this week, Donald Trump’s man on the inside will be three for three: Three meetings in a governor’s seat, three dissents, all for an upsized reduction to rates with core inflation loitering a full percentage point above target. That speaks to what we can expect in 2026, once Jerome Powell’s replaced by someone more amenable to Trump’s dovish inclinations, likely Kevin Hassett.

It’s entirely possible Miran’s dovish dissent will be accompanied by a hawkish dissent, as it was in October, when Jeff Schmid voted to keep rates unchanged. That said, a run of soft readouts on a bevy of private sector labor market indicators may make it easier for Powell to persuade the hawks, and phrasing it that way assumes he isn’t one himself.

It’s pretty remarkable that a cut’s now priced as a foregone conclusion. Powell was adamant — and I do mean adamant — during his October press conference that December’s meeting was by no means a lock for another rate reduction. Minutes from that meeting underscored the point.

Recall the following passage from the account of 2025’s penultimate policy gathering:

[Although] most participants judged that further downward adjustments to [Fed funds] would likely be appropriate as the Committee moved to a more neutral policy stance over time, several of these participants indicated they did not necessarily view another 25bps reduction as likely to be appropriate at the December meeting [while] many suggested that, under their economic outlooks, it would likely be appropriate to keep the target range unchanged for the rest of the year.

The October meeting minutes from which that excerpt’s pulled were released on November 19. December rate cut odds bottomed out that day (or around that day) below 30%. Then, on November 21, John Williams gave a speech essentially telling traders they were under-pricing the December meeting.

Since then, a majority of the labor market readouts argued strongly for the notion that the US hiring impulse has faded or even gone into reverse. Although the September jobs report, released on a delay, boasted a strong headline, the unemployment rate nearly rounded to 4.5%, low by historical standards, but high for the post-pandemic era.

The Fed won’t have the October or November jobs numbers from the BLS when it meets this week. The Trump administration canceled the household survey for October and the establishment survey data for that month will be released on December 16 alongside the full November jobs report.

What the Fed does have, though, is a hodgepodge of evidence which together points to a very soft jobs market. Last week’s ADP update suggested private employers shed the most jobs since 2023 in November, the newly-relevant Revelio tally was negative a second month (and a fifth in seven) and the Challenger report evidenced more job cuts and little in the way of planned hires.

At the same time, consumer sentiment’s abysmal, pointing to slower spending even as record-high stock prices and the legacy of the post-COVID home equity bonanza will probably continue to support consumption among well-to-do households in true “K-shaped” fashion.

So, a rate cut. And what else? Probably an indication — both from the dot plot and from Powell at the presser — that the Fed intends to pause thereafter until mid-2026.

The dot plot refresh is almost irrelevant, though: The Fed’s terrible at predicting where its own policy rate will be a year hence (“The dot plot’s not a prediction!” chided Powell), and with the US economy at a crossroads and a leadership change in the offing, there’s exactly no reason to believe December’s median dot for the coming year will be any more accurate than usual.

The statement language may include some manner of nod to the possibility that downside risks to the labor market have grown, although the October language doesn’t feel too stale in that regard.

Bottom line: A mere three weeks ago, markets doubted a cut in December at all, and assumed that if the Committee went ahead with a third reduction in three meetings, it’d be accompanied by overtly cautious (or even hawkish) messaging. Now, a cut’s guaranteed and the accompanying communications will be neutral (or even dovish).

Finally, I’d be remiss not to note that Powell’s a lame duck. Assuming he doesn’t pick Chris Waller or Miki Bowman, Trump’s Fed Chair choice will almost surely speak out in favor of additional easing early and often, undercutting any attempt on the Committee’s part to convey a disinclination to the sort of aggressive cuts that’d take rates decisively into accommodative territory.