2025 Fed December Rate Cut Plans: Market Impact and Committee Division Analysis

This analysis is based on The Wall Street Journal report [1] published on November 24, 2025, which revealed that allies of Federal Reserve Chair Jerome Powell, including New York Fed President John Williams and San Francisco Fed President Mary Daly, have laid the groundwork for a December 9-10 FOMC rate cut—despite expected multiple committee dissents. The FOMC faces a divided consensus, gaps in economic data, and concerns about a potential “whiff of stagflation.”

On the day of the report, equity markets reacted positively [0]:

• The tech-heavy NASDAQ Composite rose 1.73%
• The S&P 500 gained 1.03%
• The Dow Jones Industrial Average (value-stock weighted) advanced 0.17%
• Apple Inc. (AAPL), a bellwether growth stock, climbed 1.85% on volume of 65.59M shares

Fed funds futures now price the probability of a December rate cut at “north of 80%”—up from roughly 50% just one week prior [2]. This shift is amplified by the Fed’s decision to end quantitative tightening (QT) on December 1, adding to market optimism about increased liquidity [2].

1. Growth vs. Value Stock Sensitivity
   : The NASDAQ’s larger gain reflects the sensitivity of growth stocks (which rely on discounted cash flow models) to lower interest rates—reduced rates increase the present value of future earnings. The Dow’s smaller gain is attributed to its composition of more value stocks, which are less rate-sensitive.

2. Policy Framing
   : Powell’s allies are positioning the potential rate cut as “risk management” (insurance against a deeper downturn) rather than a response to an immediate crisis [3], which may help mitigate dissent concerns.

3. Data Dependency
   : Upcoming PCE inflation data (the Fed’s preferred gauge) is critical—any resurgence in inflation could collapse rate-cut expectations and reverse November 24 market gains [4].

• Committee Dissent
  : Multiple public dissents could erode market confidence in the Fed’s policy path, leading to increased volatility.
• Inflation Reversal
  : A surprise increase in PCE inflation data could derail rate-cut expectations.
• Growth Uncertainty
  : Weakening jobs market indicators and diverging job creation/economic growth trends add complexity to the Fed’s decision [3].

• Liquidity Tailwind
  : The end of QT on December 1 could provide additional market support alongside potential rate cuts.
• Growth Stock Momentum
  : Rate-cut expectations may continue to benefit rate-sensitive growth stocks like AAPL.

The WSJ report indicates Powell’s allies are pushing for a December Fed rate cut amid committee division, missing data, and stagflation concerns. Markets reacted positively, with tech stocks and the NASDAQ outperforming. Rate-cut probabilities have surged to over 80%, and the end of QT adds to liquidity optimism. Decision-makers should monitor upcoming PCE inflation data, FOMC committee communications, and jobs market indicators to assess the sustainability of market gains and policy outcomes.