October Fed Meeting Delivers Hawkish Shock: Powell Pushes Back on December, Facing Rare Two-Way Dissent

TradingKey - At its October 2025 FOMC meeting, the Federal Reserve delivered the widely expected 25-basis-point rate cut, but the decision came with two unexpected hawkish signals: a rare two-way split in dissenting votes — the first in six years — and an unusually direct hawkish message from Chair Jerome Powell, who urged markets to prepare for no December rate cut.

After launching its first rate cut of the year in September, the Fed cut rates again on Wednesday, October 29, lowering the federal funds rate to 3.75%–4.00%, reflecting growing concern over labor market weakness within its dual mandate of price stability and maximum employment.

However, unlike the September dot plot, which suggested three cuts in 2025, traders sharply scaled back expectations for a December cut after this meeting — as internal Fed divisions proved broader and more hawkish than anticipated.

According to CME FedWatch, the probability of a December rate cut plunged from over 90% before the meeting to around 30% afterward, while odds of holding rates steady rose to nearly 70%.

Nomura Securities, which had forecast another 25bp cut this year, quickly revised its outlook, now expecting the Fed’s easing cycle to be complete for 2025 — even if upcoming data turns slightly dovish, it may not be enough to trigger deeper concerns about job market deterioration.

Historic Two-Way Dissent Emerges

As in September, Governor Stephen Miran — a Trump appointee — dissented by advocating for a 50-basis-point cut, arguing that faster action is needed to protect the labor market.

But the surprise came from Jeffrey Schmid, President of the Kansas City Fed, who also cast a dissenting vote — not for a bigger cut, but to keep rates unchanged.

This marks the first time since 2019 that the FOMC has seen dissent on both sides of a rate decision — signaling a three-way split:

• One camp favoring larger cuts (dovish)
• The majority supporting a 25bp cut (moderate)
• A growing faction preferring no change (hawkish)

While a similar two-vote split occurred in July, that was over whether to cut at all (hold vs. 25bp). This October’s two-way divergence — between those wanting more easing and those wanting none — is unprecedented in the past six years.

It also marks the first time since 2019 that the FOMC has seen disagreement across three consecutive meetings.

Powell Delivers Unusually Blunt Message

In his post-meeting press conference, Chair Powell broke from his usual “data-dependent” script, delivering a stark warning:

“A further reduction in the policy rate at the December meeting is not a foregone conclusion, far from it.”

Analysts called this one of Powell’s most hawkish statements in recent memory, moving away from the open-ended “autopilot” approach toward a firmer stance.

He added that near-term risks are balanced — upside risks to inflation, downside risks to employment. It’s a challenging environment.

Hawkish Sentiment Stronger Than Expected

Pooja Sriram, economist at Barclays, said:

“This was clearly something that we did not expect there would be such a strong pushback against. The one thing that we can make out from the press conference is they clearly had a lot of discussion about December.”

Evercore ISI observed that the hawkish weight is heavier than they thought. They project that when the meeting minutes are released in three weeks, they may reveal that half of voting members — governors and regional bank presidents — now form a “hawkish bloc.”

Michael Feroli, JPMorgan economist, pointed out that four of the twelve regional Fed banks did not request a reduction in their discount rate — which typically moves in tandem with the fed funds rate. This time, it was cut by 25bp alongside policy rates.

Feroli interpreted this as a signal:

“That’s perhaps indicating that there were already some misgivings about cutting rates when core inflation is close to 3%.”