Fed meeting in December: JPMorgan's "U-turn" and the unknown hot seat of Chairman

(Dan Tri) - The market held its breath waiting for the December Fed meeting when JPMorgan reversed its forecast, Mr. Trump announced that he had chosen a new Fed Chairman. Will the interest rate cut spur a year-end rally?

With less than two weeks to go until the Federal Open Market Committee (FOMC) holds its final policy meeting of 2025 (December 9-10), the mood in financial markets can be summed up in two words: "holding your breath."

In contrast to the gloom of early November, a wave of optimism is blowing again as a series of signals from macro data to the political upper echelons are pointing to a turning point decision.

The spectacular turnaround of the "sharks" of Wall Street

For weeks, investor sentiment has been on a roller coaster. At the end of October, the market was betting 100% that the Fed would cut interest rates. But then the US government shutdown and the delayed jobs report sent the probability plummeting below 30% by early November.

But the tide has turned. JPMorgan, the banking giant that has held a conservative view that the Fed will remain inactive until January 2026, has just released a shocking assessment. The bank’s experts now predict the Fed will cut by 0.25 percentage points as soon as December 10. Goldman Sachs quickly agreed.

The move was prompted by signals from within the Fed itself. New York Fed President John Williams appeared to have given the green light by admitting that the labor market was cooling. Traders are now pricing in a more than 85% chance of a rate cut, according to data from CME FedWatch.

The concern is that the Fed is operating with one eye open. The government shutdown disrupted the crucial October and November jobs reports, forcing the Fed to rely on old data from September, where the unemployment rate edged up to 4.4% but new jobs still increased by 119,000, creating a conundrum about the health of the economy .

The Federal Open Market Committee (FOMC) will announce its final decision on interest rates on December 10 (Photo: Inc. Magazine).

“Civil War” at the Fed and Expectations for the Santa Claus Rally

Inside the Federal Open Market Committee (FOMC), divisions are deeper than ever. Observers say the Fed is now divided into three distinct factions.

Doves: Worried about a weakening labor market, want to cut interest rates immediately (represented by Christopher Waller).

Hawks: Fear inflation from new tariff policies, want to keep interest rates unchanged (like Jeffrey Schmid).

The neutrals: Including Chairman Jerome Powell, who has maintained a cautious silence.

Despite the internal disagreement, history is on the side of the optimists. Since 1930, the S&P 500 has risen in December 73% of the time, according to the Stock Trader’s Almanac. In particular, the “Santa Claus rally” effect has resonated strongly with monetary easing cycles.

A rate cut at this time would help reduce capital costs, stimulate cash flow away from bonds and back into the stock market, promising a happy ending for the 2025 financial year.

Unknown from the White House: Has Mr. Trump finalized the "chosen person"?

The heat of the December meeting increased with the latest developments from President Donald Trump. On November 30, Mr. Trump announced to the press that he had chosen a successor to the Fed Chairman position and would announce it soon.

All eyes are on Kevin Hassett, Director of the National Economic Council (NEC). On the Kalshi forecasting platform, Mr. Hassett’s probability of being nominated has jumped to 72%, far ahead of other candidates. Hassett is known to support Mr. Trump’s policies and tends to prioritize growth.

Experts say the pressure from the White House is evident. Mr. Trump has repeatedly publicly called for the Fed to cut interest rates more aggressively. If Jerome Powell’s successor is a “dove,” the market can expect a more aggressive monetary easing path in 2026.

The December 10 meeting is not just about a quarter point. It is a test of the Fed’s ability to operate amid a lack of data and political pressure.

Whatever the Fed decides, the market will see strong fluctuations. Simon Moore, a senior contributor to Forbes, commented: "The biggest issue now is not whether the Fed will cut or not, but how fast and steep the cutting path will be in the coming time."

Source: https://dantri.com.vn/kinh-doanh/fed-hop-thang-12-cu-quay-xe-cua-jpmorgan-va-an-so-ghe-nong-chu-tich-20251201093604460.htm