Fed Minutes: A Pivotal December Decision Looms

On Wednesday, the Federal Reserve will publish the minutes of its most recent meeting – widely seen as the most important release of the year, and one of the key market events since the beginning of 2025, for several reasons.

The significance of these minutes lies first in the fact that they are the Fed’s first formal communication since the end of the U.S. government shutdown. That shutdown, triggered by the failure of the ruling Republican Party and the Democrats to agree on legislation to fund federal government operations and agencies, disrupted the work of several institutions responsible for releasing key economic indicators.

Those indicators typically play a crucial role in shaping monetary policy decisions. Their absence over recent weeks has deprived policymakers of part of the usual information set they rely on to assess growth, inflation and the labor market.

The October FOMC minutes are therefore especially important because they follow a period largely devoid of major data – a gap that Fed officials, including Chair Jerome Powell, have openly complained about when discussing the current stance of monetary policy and its future path.

Their importance is further amplified by timing: they come just ahead of the final Federal Open Market Committee (FOMC) meeting of 2025. Markets see this last gathering as an opportunity for the central bank to ensure it is on the right path as it heads into the new year, in light of the latest data and evolving market conditions.

The minutes also carry considerable weight because of the sheer volume of recent public remarks by Fed policymakers. The bulk of those comments have signaled a growing preference to pause, or at least slow, the new round of quantitative easing the central bank has embarked upon.

The final meeting of 2025

The FOMC has only one meeting left in 2025, scheduled for 10 December, at which it will decide on interest rates.

Market pricing currently suggests that the odds are roughly balanced between a rate cut and leaving rates unchanged at their current target range of 3.75%–4.00%. Over a longer horizon, fixed-income markets, as reflected in the CME FedWatch tool, indicate that the Fed is on a path toward gradually lowering rates toward around 3.00% by 2026, although the exact timing of this adjustment remains unclear.

The October meeting minutes, due for release on 19 November, may offer further clues about the direction of monetary policy. A number of committee members are expected to argue in favor of a rate cut, and the details of that debate will be closely scrutinized by investors looking to refine their expectations for the Fed’s next moves.

Economic Data

Employment and inflation indicators remain central to the Federal Reserve’s assessment of future monetary policy moves.

However, the recent period has been marked by a significant blackout of key releases due to the 43-day government shutdown—the longest in U.S. history. The suspension of operations at several federal agencies delayed major data reports that ordinarily serve as critical inputs for the Fed, particularly those related to labor-market conditions.

Because of this gap, the internal policy debate has become even more dependent on whatever labor-market data is available. The September jobs report is scheduled for release on 20 November, but policymakers are expected to place greater emphasis on October and November figures. While job creation has slowed in recent months, opinions remain divided over whether this softening poses a substantial economic risk.

As the December meeting approaches, the policy outlook remains finely balanced. A sharper-than-expected rise in unemployment would strengthen the case for a rate cut, while a stable labor market would support keeping rates unchanged. The meeting is therefore likely to feature a split among members, underscoring the delicacy and importance of the final decision.

The Case for (and Against) Further Quantitative Tightening

Federal Reserve Governor Christopher Waller has been one of the strongest advocates for lowering interest rates. In a speech titled “The Case for Continuing to Cut Rates” on 17 November, he argued that the labor market remains fragile, that the inflationary effects of tariffs are temporary, and that core inflation is already close to the Fed’s 2.00% target.

Waller also noted that GDP growth slowed noticeably in the second half of 2025 compared with the second quarter, reinforcing his argument for additional easing.

On the other side of the debate, several policymakers have pushed back against further cuts.

• Vice Chair Philip Jefferson, in remarks supporting the dollar, warned that the Fed should proceed cautiously, emphasizing that current interest rates remain “somewhat restrictive” and that moving slowly toward a neutral rate is “the prudent approach.”
  
• Boston Fed President Susan Collins and Cleveland Fed President Beth Hammack also opposed further reductions. Hammack said she would not support additional cuts unless economic conditions changed significantly, stressing that “elevated and persistent inflation remains a concern.”
  
• Collins noted last Wednesday that maintaining rates at current levels “for some time” is appropriate to balance the risks of inflation and unemployment in an environment of unusually high uncertainty.
  
• Kansas City Fed President Jeff Schmid argued that lowering rates would not address structural labor-market challenges and may even intensify inflationary pressures.
  
• Dallas Fed President Lorie Logan reiterated she would not support further cuts without “compelling evidence” that inflation is declining at a faster pace.
  

This spectrum of views highlights the deep divisions within the Fed and sets the stage for a highly consequential final policy debate of the year.