Fed cut looks “more than likely” in December, Barclays says; dissent risk looms for dollar and front-end yields
A quarter-point rate cut at the Federal Reserve’s December 9–10 meeting is now the base case, according to Barclays, reinforcing market bets and setting up the dollar and front-end Treasury yields for potential turbulence if hawks dissent.
Markets brace for first step of Fed easing
Barclays said pricing now implies an over 80% chance of a 25bp cut, and expects Chair Jerome Powell to carry a solid voting bloc behind the move. The bank anticipates support from policymakers including Waller, Bowman, Williams, Jefferson, Cook, and Barr.
Key points
- Barclays sees a 25bp Fed rate cut on December 9–10 as “more than likely,” with markets pricing odds above 80%.
- Powell is expected to marshal a majority in favor; Waller, Bowman, Williams, Jefferson, Cook and Barr likely supportive.
- At least two hawkish dissents are anticipated (Schmid, Musalem), with Goolsbee or Collins also possible dissenters.
- Barclays expects Miran to dissent in favor of a larger cut rather than opposing easing outright.
- Guidance reinforces lower front-end yields but raises risk of meeting-day volatility from hawkish pushback.
- FX lens: a confirmed cut could weigh on the dollar initially, though visible dissent might blunt USD downside via higher rate-vol.
Dissent risk could stir volatility
While the easing tilt appears secure, Barclays warns the committee is far from unified. The bank expects at least two hawkish dissents from Schmid and Musalem, with either Goolsbee or Collins potentially joining them. In a twist, Miran is seen dissenting on the other flank by advocating a larger reduction than 25bp.
For markets, that split matters. A clean, broad-backed cut would typically stabilize expectations and keep front-end yields suppressed. But a conspicuous hawkish minority could elevate rate volatility on the day, narrowing the dollar’s downside and tempering risk-on impulse in equities and credit.
Rates and FX setup
Barclays’ call effectively underwrites the recent slide in front-end yields, anchoring the two-year sector and promoting a modest bull-steepening bias into the meeting. In FX, a 25bp cut accompanied by easing-leaning guidance would usually pressure the dollar against high-beta and carry currencies. However, pronounced dissent could lift near-term yields intraday, invite a squeeze in USD shorts, and keep implied FX volatility elevated around the event.
What to watch into the decision
– Language around inflation progress and labor cooling: softer tone would validate further 2025 easing bets.
– Vote split: two-plus hawkish dissents would underscore divisions and may limit dovish interpretation.
– Balance of risks: hints at uneven growth or disinflation traction could shape the glidepath for subsequent cuts.
– Market internals: liquidity and positioning into the announcement amplify moves, especially in front-end rates and the DXY.
Trading implications
– Fixed income: Duration remains supported at the front end; curve could steepen if the Fed signals a cautious but durable easing cycle.
– FX: Initial USD weakness is likely under a clean 25bp cut; dissent and higher rate-vol may cap follow-through and favor tactically nimble positioning.
– Equities and commodities: Easing bias typically bolsters risk appetite; yet a contentious split could trigger intraday swings in cyclicals, gold, and oil-linked FX.
As Barclays’ stance converges with market pricing, the focus turns from “if” to “how” the Fed communicates its first easing move—details that will set the tone for dollar direction, curve shape and risk sentiment into year-end, BPayNews understands.
FAQ
What is Barclays forecasting for the December Fed meeting?
Barclays expects a 25bp rate cut on December 9–10, with odds above 80% already reflected in market pricing.
Who is likely to support the cut?
The bank expects Chair Powell to be backed by Waller, Bowman, Williams, Jefferson, Cook, and Barr.
Who could dissent and why does it matter?
Barclays anticipates hawkish dissents from Schmid and Musalem, with Goolsbee or Collins also possible dissenters. Miran is expected to dissent in favor of a larger cut. Visible splits can raise rate volatility and influence how dovish the market perceives the decision.
How might the decision affect the US dollar?
A clean 25bp cut typically weighs on the USD. However, multiple hawkish dissents could limit USD downside by lifting front-end yields and rate volatility on the day.
What are the likely moves in Treasury yields?
Front-end yields are likely to stay anchored into the meeting. A cut with easing-friendly guidance favors a bull-steepening bias; pronounced dissent could blunt that move and spark intraday swings.
What should traders watch most closely during the announcement?
The vote split, the tone on inflation and labor trends, and any framing of balance-of-risks. These details will shape expectations for the pace of further cuts and the market’s cross-asset reaction.
