Fed Dissent Creates December Rate Cut Uncertainty Amid Market Volatility

This analysis is based on the CNBC segment featuring Steve Liesman on “Squawk Box” [1], which discussed the Federal Reserve’s recent policy decision and growing uncertainty about December rate cuts. The segment followed the Fed’s October 29, 2025 meeting where the FOMC approved a 25-basis point rate cut but with unusual dissenting votes in both directions [2][3].

The October meeting lowered the federal funds rate to 3.75-4.00%, marking the second consecutive rate cut in 2025 [4]. However, the decision was complicated by two dissenting votes: Fed Governor Stephen Miran advocated for a larger 50-basis point cut, while Kansas City Fed President Jeffrey Schmid voted against any easing [5][6]. This marked the first time since 2019 that the Fed experienced “dueling dissents” - with officials calling for both easier and tighter policy simultaneously [8].

Market reactions were immediate and negative. Following the Fed’s decision and Powell’s comments about December uncertainty, major U.S. indices declined [0]:

• S&P 500: Closed at 6,890.59 on October 29, down 20.36 points (-0.29%)
• Dow Jones: Fell to 47,632, down 114.79 points (-0.24%)
• NASDAQ Composite: Declined to 23,958.47, down 28.82 points (-0.12%)

The weakness continued with the S&P 500 falling an additional 0.56% on October 30 and another 0.57% on October 31 [0].

The divergence within the FOMC reflects deep uncertainty about the economic trajectory. Stephen Miran, recently appointed by President Trump in September 2025, has consistently advocated for more aggressive easing, marking his second consecutive dissenting vote [6][11]. His stance aligns with the administration’s preference for lower rates. Conversely, Jeffrey Schmid, who voted for the September rate cut, expressed doubts about further easing due to ongoing inflation concerns [6].

Market pricing for December rate cuts shifted dramatically following Powell’s comments. According to LSEG calculations, the probability of a 25-basis point cut in December dropped from 85% before the meeting to 67.9% afterward [7] - a substantial 17.1 percentage point reduction in expectations for continued monetary easing.

With the latest cut, the Fed’s policy rate now stands at its lowest level since December 2022, approximately 150 basis points below its peak last year [9]. Despite this easing, inflation remains above the Fed’s 2% target while the labor market shows signs of weakening [10].

The divergence between officials calling for more aggressive easing and those advocating for policy restraint suggests the Fed’s reaction function may be less predictable than usual [12]. Chair Powell’s emphasis on “strongly differing views” and “very high level of uncertainty” indicates even Fed officials lack clarity on the economic trajectory [13].

The combination of policy uncertainty and shifting market expectations could lead to increased volatility, particularly around economic data releases and Fed official speeches. Traders should be prepared for rapid adjustments in rate cut probabilities.

1. December FOMC Meeting
   : Evolution in dissenting votes and committee consensus
2. November Employment Report
   : Crucial data for the December meeting decision
3. Inflation Trends
   : Whether inflation continues to moderate or remains sticky above 2%
4. Fed Balance Sheet
   : Monitor the conclusion of the Fed’s balance sheet reduction program scheduled for December 1 [14]

The Fed’s October 29 meeting created significant market uncertainty through rare dueling dissents over monetary policy direction. The 25-basis point rate cut to 3.75-4.00% was opposed by both officials wanting more aggressive easing and those advocating for restraint. Market pricing for December rate cuts fell from 85% to 67.9%, while major indices declined for three consecutive days. The policy rate now stands at its lowest level since December 2022, but inflation remains above the 2% target. Key factors to monitor include the November employment report, inflation trends, Fed communication, and the conclusion of the balance sheet reduction program. The unprecedented level of policy disagreement suggests heightened market volatility and less predictable monetary policy in the near term.