Who will decide whether the Fed will cut interest rates in December? Overview of the FOMC voting mechanism.

Deng Tong, Golden Finance

According to CME's “Fed Watch”: The probability of the Federal Reserve lowering interest rates by 25 basis points in December is 69.4%, while the probability of maintaining the current rate is 30.6%. White House economic advisor Hassett pointed out that the new leadership of the Federal Reserve may be expected to lower rates, and Trump may interview candidates for the Federal Reserve in the coming months; we may determine the chairperson of the Federal Reserve around the New Year. The market is currently paying close attention to the Fed's FOMC meeting.

I. The Voting Mechanism of the Federal Reserve FOMC Meeting

The Federal Open Market Committee (FOMC) of the Federal Reserve makes decisions by majority vote, with each voting member having an equal vote. The Committee consists of 12 voting members, divided into two parts: permanent voting members and rotating voting members.

• All members of the council (up to seven people);
• President of the Federal Reserve Bank of New York;
• Among the remaining 11 reserve bank presidents, 4 take turns serving, with a term of one year.

Seven reserve bank presidents who do not have voting rights will attend the Federal Open Market Committee meeting and participate in the committee's discussions.

voting mechanism

• Majority Vote Decision: At the end of each two-day meeting, participants will vote on monetary policy proposals (for example, whether to adjust the target range for the federal funds rate), and proposals that receive a majority vote will be adopted.
• Consensus: Although there is a voting mechanism, FOMC members typically engage in extensive discussion and negotiation to seek consensus, ensuring that policy decisions have broad support and convey a consistent message to the market.
• Objection Record: If a voting member disagrees with the final decision, their objection will be formally recorded in the meeting minutes, showcasing the diversity of opinions within the committee to the outside world.

LPL Financial Chief Economist Jeffrey Roach stated: “In fact, committee members communicate closely during the breaks of the meetings, striving to reach a consensus, but this does not guarantee that a consensus will be reached.”

Reaching a consensus among all members of the Federal Reserve helps convey a unified message from Fed officials regarding their actions to the market. However, if there are discrepancies in the voting results, it may raise questions about whether the Fed believes its actions are correct and the motives of its officials.

2. 2025 FOMC Voting Members and Their Leanings

Permanent Voting Members ( Members of the Federal Reserve Board and President of the New York Fed )

• Jerome H. Powell, Chair ( Federal Reserve Board ): indecisive

On October 29, following the Federal Reserve's decision to cut interest rates by 25 basis points, Powell stated at the press conference that the rate cut action may not last until December as previously widely predicted. “Further rate cuts at the December meeting are by no means a foregone conclusion. There are significant disagreements among all parties today. This indicates that we have not yet made a decision on the interest rate trajectory for December.” Powell acknowledged that the Federal Reserve is in a difficult position, with economic trends pulling monetary policy in the opposite direction. “The situation we are facing now is that inflation is facing upward risks, while employment is facing downward risks. We only have one tool… you cannot address both issues at the same time.”

• John C. Williams, Vice Chairman ( President of the New York Fed ): Leaning towards rate cuts

Williams stated at a meeting of the Central Bank of Chile that U.S. interest rates could decline without jeopardizing the Federal Reserve's inflation target, while also helping to prevent a downturn in the labor market. “I think monetary policy has tightened slightly… therefore, I believe there is still room for further adjustments in the target range for the federal funds rate in the short term to bring the policy stance closer to neutral.” Williams noted that the Federal Reserve needs to achieve its inflation target “without taking excessive risks to the full employment goal.”

• Michelle W. Bowman, Federal Reserve Board Member: Leaning towards interest rate cuts

Bowman stated during a speech after the Federal Open Market Committee (FOMC) decided to cut interest rates for the first time since 2025 in September: “Now is the time for the Committee to take decisive and proactive action in response to the declining vitality of the labor market and signs of weakness. We are likely already behind the curve in addressing the deteriorating conditions of the labor market.”

• Stephen I. Miran, Federal Reserve Board Member: favors interest rate cuts

Milan clearly supports a rate cut in December, deeming it “very appropriate.” He emphasized on November 15 that the overall data since September has been dovish, supporting the Federal Reserve's strengthening dovish stance. Earlier, he suggested a rate cut of 50 basis points, with at least a 25 basis point cut. He believes that if there are no significant changes in economic data, continuing to cut rates is “a consistent and reasonable choice.” Milan was appointed by Trump as the former chief economic advisor at the White House, and there are doubts about his independence—his radical stance has exacerbated divisions within the Federal Reserve.

• Christopher J. Waller, Federal Reserve Governor: leaning towards interest rate cuts

On November 17, Waller stated that he supports a 0.25 percentage point reduction in the key interest rate in December again to help boost the weak U.S. labor market—and he doubts he will change his mind. Waller indicated that based on surveys of consumers and businesses as well as his interactions with large employers, he is confident that the labor market conditions have worsened. He noted that key employment data, which had been delayed due to a record 43-day government shutdown, is likely to show results that are contrary to this once released. “The labor market remains weak, close to stagnation.” Meanwhile, inflation has not surged significantly in recent months. He stated that the economic slowdown and high interest rates are suppressing consumer spending, which helps control inflation. “Given the signs of slowing economic growth and the weak labor market that may lead to modest wage growth, I do not see any factors that would cause inflation to accelerate.”

• Michael S. Barr, Federal Reserve Board Member: Cautious Interest Rate Cuts

On November 20, Michael Barr stated, “I am concerned that the inflation rate is still around 3%, while our target is 2%. So we need to be cautious with monetary policy now, as we want to ensure that we achieve the dual objectives of our mission.”

• Lisa D. Cook, Federal Reserve Governor: Uncertain

In an interview with the Brookings Institution in Washington, Cook stated: “I determine my monetary policy stance at each meeting based on the latest data from various sources, changes in my expectations, and risk balance. Each meeting, including the one in December, is a live meeting.”

• Philip N. Jefferson, Federal Reserve Board Member: Wavering

On November 17, Jefferson pointed out that as the Federal Reserve loosens its policy to a position that may halt progress in slowing inflation, it needs to “proceed slowly” on further interest rate cuts. “In recent months, I believe the balance of risks in the economy has shifted, with the downside risks to employment having increased compared to the upside risks of inflation, which may have recently diminished.” Jefferson will be guided by data and will adopt a “meeting by meeting” approach to determine policy. “At this current juncture, this is especially a prudent approach.” Ahead of the December Federal Reserve policy meeting, “it is still unclear how much official data we can see.”

2025 rotating voting members ( regional Federal Reserve presidents )

• Susan M. Collins, President of the Boston Fed: Leans towards not lowering interest rates

On November 12, Collins stated: Due to concerns about high inflation, she believes that the threshold for further easing monetary policy in the near term is “relatively high.” “In the absence of clear evidence of deterioration in the labor market, I would not easily ease policy, especially given that government shutdowns have limited inflation information. In the current highly uncertain environment, it may be appropriate to maintain the policy rate at its current level for a period of time to balance inflation and employment risks.”

• Alberto G. Musalem, President of the St. Louis Fed: Tends not to lower interest rates

On November 10, Musalem expressed clear skepticism about the prospects for further monetary easing. In an interview with the media, he stated, “We must act cautiously at this moment, which is crucial. I believe that the room for further easing of policies is very limited without making the policies overly loose.” Musalem believes that the current inflation rate is closer to 3%, rather than the Federal Reserve's target of 2%. He added that the financial environment, including stock valuations and housing prices, is at a high level; monetary policy is closer to neutral rather than mildly restrictive; and the labor market has also cooled in an orderly manner. “I believe we need to continue taking measures to curb inflation.”

• Jeffrey R. Schmid, President of the Kansas City Fed: Prefers not to lower interest rates

On November 14, Schmied stated that the impact of further interest rate cuts on reinforcing high inflation would outweigh the support effect on the labor market: “I believe that further interest rate cuts will not play a significant role in repairing the cracks in the labor market—these pressures are more likely to stem from structural changes in technology and immigration policy. However, interest rate cuts could have a more lasting impact on inflation, as they will increasingly raise doubts about our commitment to the 2% inflation target.” This reasoning is guiding his thoughts on the upcoming Federal Reserve policy meeting in December, and he added that he remains open to new information in the coming weeks.

• Austan D. Goolsbee, President of the Chicago Fed: Cautious rate cut

Goolsbee stated at an event of the Chartered Financial Analyst Association in Indianapolis that the process of inflation rising back to 2% “seems to have stalled.” “This makes me a bit uneasy.”

In summary, among the 12 voters, four clearly lean towards a rate cut, while the other eight are uncertain or do not support a rate cut.

III. Expectations for the Federal Reserve's Rate Cut in December

• Barclays research points out that there is still uncertainty regarding the Federal Reserve's interest rate decision next month, but Chairman Powell is likely to push the FOMC to make a rate cut decision. Based on recent speeches, Barclays believes that Governors Mester, Bowman, and Waller may support a rate cut, while regional Fed Presidents Muthalam and Schmidt tend to favor keeping rates unchanged. Governors Barr and Jefferson, as well as Goolsbee and Collins, have shown that their attitudes are not yet clear but lean more towards maintaining the status quo. Governors Cook and Williams rely on data but seem to be more supportive of a rate cut. Barclays stated, “This means that before considering Powell's position, there may be six voters inclined to keep rates unchanged and five inclined to cut rates.” The bank added that Powell will ultimately dominate this decision, as the threshold for the governors to publicly oppose his stance is very high.
• Citic Securities research report states that New York Fed President Williams hinted at a further interest rate cut in December. Market expectations for a rate cut have reversed, and currently the market believes there is a 70% chance that the Fed will cut rates in December. The Fed will enter its quiet period starting November 29, during which Powell has no scheduled public speeches or media interviews. Williams' remarks, being the close ally of Powell, may be the last comments from a Fed official to influence market expectations. Continuing with the previous view, it is anticipated that December might be a “close call” for a rate cut, with a magnitude of 25bps. For the market, the reversal of rate cut expectations combined with the advancement of the “28 points” plan and news that the Trump administration is considering exporting H200 chips to China means that macro factors will no longer be a source of pressure for the market in the short term. The market may shift its focus more towards issues such as AI companies issuing bonds and cryptocurrency trends.
• The probability of a 25 basis point rate cut by the Federal Reserve in December on Polymarket has risen to 67%.