The latest Fed minutes read like another nail in the coffin for a December interest rate cut

Markets have sharply scaled back expectations for a Fed rate cut in December—CME FedWatch now puts the odds of a 25bp cut at 32% versus 98.9% a month ago—with the policy rate likely to be left at 3.75–4.00%. October FOMC minutes show a deeply divided committee: some members say current 3% inflation is “close” enough to the 2% goal to justify a hold, while others warn inflation has been too high and urge cuts; the Fed also flagged rising downside risks to employment as the labor market stagnates and structural factors like AI weigh on demand. Despite those employment concerns that could argue for easing, Goldman Sachs and RSM expect only modest payroll gains (Goldman’s tracker ~85k private jobs, net payrolls roughly flat and unemployment around 4.3%; RSM ~+50k) and upward revisions to prior months, which would further reduce December cut odds, even as political pressure for easier policy persists.

Analysis

Market expectations for a December Fed rate cut have collapsed: the CME FedWatch probability for a 25bp reduction is 32% versus 98.9% a month ago, and the federal funds rate is likely to remain in the 3.75%–4.00% range. October FOMC minutes reveal a sharply divided committee—some members view current 3% inflation as “close” to the 2% target and comfortable with a hold, while many others note inflation has been above target and not clearly returning to 2%.

The committee flagged rising downside risks to employment and described the U.S. labor market as stagnating into a low-hire, low-fire dynamic, with a data blackout from the government shutdown obscuring full detail; participants expect gradual deterioration and note structural factors such as AI may be softening labor demand. Economists’ near-term payroll forecasts are modest: Goldman’s tracker shows ~85,000 private jobs with overall unemployment steady at ~4.3%, and RSM expects ~+50,000—plus likely upward revisions to prior months.

These labor forecasts and the Fed’s divided stance help explain the market’s hawkish repricing and a moderately negative sentiment backdrop (sentiment_score -0.45, market_impact_score 0.6). Political pressure for easier policy (White House urgings and an outlier advocating a 50bp cut) creates headline risk but, based on the minutes and data expectations, appears insufficient to tilt policy odds materially toward a December cut.

Key Decisions for Investors

• Position for a Fed hold by shortening duration in fixed-income portfolios and trimming exposure to rate-sensitive equities such as housing/REITs, given the 32% odds of a December 25bp cut and a likely 3.75%–4.00% policy range
• Monitor the September jobs report and subsequent revisions closely—Goldman’s ~85k private jobs estimate and RSM’s ~+50k forecast mean stronger-than-expected payrolls would further reduce cut odds and should prompt tightening of cyclical or rate-exposed positions
• Use tactical hedges rather than large directional wagers: the FOMC is clearly split and the Fed is 'not on a preset course,' so watch FOMC communication and political headlines (White House pressure, Miran’s 50bp outlier) for short-term volatility triggers