The “Done Deal”: Markets are pricing in a 90% chance of a third consecutive 25bp cut. However, don’t expect a unanimous decision—officials are increasingly divided, and we could see up to four members voting for a “no change” decision.

The Labor Market Alarm: The “doves” are worried. A stunning stat reveals that 90% of recent US job creation has come from just three sectors: government, healthcare, and leisure. Almost every other sector (tech, retail, transport) is shedding jobs. The foundation is more fragile than the headline numbers suggest.

The Inflation Hawks: Conversely, some members argue that the economy is still growing, stocks are at all-time highs, and tariff risks loom large. They believe there is no pressing need to rush further cuts.

The 2026 Outlook: The Fed will likely signal a slowdown, projecting only one cut for 2026. However, analysts see a different reality: cooling inflation and a softening job market could force the Fed’s hand to cut twice in the first half of 2026 (March and June).

The “New” Fed Incoming: Politics will soon play a major role. With Kevin Hassett potentially taking the Chair and Trump appointees filling the board, the Fed’s composition could shift drastically Dovish (favoring lower rates) by mid-2026.

Dollar Dynamics: Expect a short-term reality check. A “hawkish cut” (cutting rates but sounding cautious) could give the Dollar a brief boost. However, year-end seasonality and looming soft jobs data suggest any rally might be short-lived.

What’s Next?
The Fed is currently walking an incredibly tightrope. While the headline economic data suggests resilience, the underlying details of the labor market—specifically that narrow concentration of job growth—are flashing warning signals.