In a swift about-face that underscores the razor-thin margins guiding Federal Reserve policy, JPMorgan Chase & Co. has reinstated its forecast for a 25-basis-point interest rate cut at the Fed’s December 9-10 meeting. Just days ago, the banking giant had pulled back from this expectation amid a robust U.S. jobs report, but fresh analysis has tipped the scales back toward easing. This shift highlights the high-stakes balancing act the Fed faces as it navigates a cooling labor market, persistent inflation pressures, and the lingering effects of earlier rate reductions.
The Federal Reserve has already trimmed its benchmark federal funds rate three times this year, bringing the current target range to 3.75%-4% following a 25 bps cut in late October. With inflation hovering near the central bank’s 2% target—albeit with some tariff-related distortions—the December decision looms as a pivotal one. A cut would lower the range to 3.5%-3.75%, providing further support to an economy showing signs of fatigue in hiring while avoiding a deeper slowdown.
A Volatile Path to December
JPMorgan’s initial retreat from a December cut came on November 21, after the Bureau of Labor Statistics reported stronger-than-expected job growth of 119,000 positions in September—more than double economist forecasts. This data, coupled with a dip in the unemployment rate to 4.2%, prompted JPMorgan, along with Standard Chartered and Morgan Stanley, to scrap their easing predictions, citing reduced urgency for the Fed to act. “The labor market’s resilience has raised the bar for further cuts,” JPMorgan economists noted at the time, aligning with a broader Wall Street view that the Fed might pause until January.
However, the narrative flipped dramatically by November 26. In a research note, JPMorgan declared it now anticipates the Fed will proceed with the 25 bps reduction, reversing its holdout stance. “Recent comments from Fed officials and the evolving data flow suggest the balance of risks continues to tilt toward employment support,” the bank stated. This pivot was echoed by Goldman Sachs, which on the same day affirmed its own forecast for a December cut, emphasizing that inflation remains “close to the 2% target” when adjusted for external factors like proposed tariffs.
The CME FedWatch Tool, which gauges market-implied probabilities from fed funds futures, now prices in roughly 70% odds of a December cut, up from 41% earlier in the month. FactSet’s economist poll, while more cautious at 22%, has also trended upward following dovish signals from key Fed voices.
Fed Speakers Tip the Scales
Central to JPMorgan’s revised outlook are recent remarks from Federal Reserve officials, particularly New York Fed President John Williams, a voting member of the Federal Open Market Committee (FOMC) and often seen as a bellwether for Chair Jerome Powell’s thinking. In a November 21 speech, Williams indicated openness to further easing if labor market softening persists, stating, “We are seeing genuine weakness in employment trends that warrants a risk-management approach.” This echoed Powell’s earlier caution that a December cut is no “foregone conclusion,” but his emphasis on monitoring downside risks to jobs has been interpreted as a green light by easing advocates.
Other FOMC participants have shown a split: While some like Cleveland Fed President Loretta Mester advocate patience amid solid growth, the majority appear aligned with gradual cuts. The September dot plot— the Fed’s quarterly projections—envisioned the funds rate ending 2025 at a median of 3.5%-3.75%, implying two more 25 bps moves from current levels, including December. Updated projections aren’t due until the December meeting, but the consensus suggests policymakers are committed to a “soft landing” trajectory.
Broader Economic Backdrop: Jobs Cool, Inflation Stabilizes
The U.S. economy’s mixed signals are fueling this debate. Nonfarm payrolls have decelerated from the blistering pace of prior years, with job gains averaging under 150,000 monthly in recent quarters—a stark contrast to the 250,000-plus surges of 2023. The Sahm Rule, a recession indicator triggered by rising unemployment, briefly flashed a warning in July but has since receded as the rate stabilized at 4.2%. Yet, downward revisions to earlier data reveal underlying fragility, with JPMorgan highlighting “genuine weakness” in sectors like manufacturing and retail.
On inflation, progress is evident. The core PCE index, the Fed’s preferred gauge, has eased to 2.1% year-over-year, edging closer to the 2% goal despite one-off pressures from energy prices and supply chain snarls. Consumer spending remains robust, buoyed by wage growth outpacing prices, but high household debt levels—now at $17.8 trillion—could amplify any tightening in financial conditions.
| Key Economic Indicators (as of Nov. 2025) | Value | Change from Prior Month |
|---|---|---|
| Unemployment Rate | 4.2% | -0.1 pp |
| Nonfarm Payrolls (Sept.) | +119K | +Double forecast |
| Core PCE Inflation (YoY) | 2.1% | -0.2 pp |
| GDP Growth (Q3 Est.) | +2.8% | +0.3 pp |
| Fed Funds Target Range | 3.75%-4% | Unchanged since Oct. |
This table illustrates the Fed’s dual mandate in action: Employment risks are rising modestly, but growth and price stability provide room for maneuver.
Divergent Views on Wall Street
Not all brokerages share JPMorgan’s optimism. Morgan Stanley and Standard Chartered maintain their no-cut calls, arguing the jobs rebound diminishes the need for immediate action. “It’s a close call,” admits Citigroup, which sticks with a 25 bps forecast but assigns only a 55% probability. Deutsche Bank, Wells Fargo, and BNP Paribas concur on easing but warn of heightened holdout risks. This split reflects broader uncertainty, including potential policy shifts under the incoming administration, such as tariff hikes that could stoke inflation.
Implications for Markets and Households
If the Fed delivers in December, as JPMorgan now bets, the ripple effects could be profound. Mortgage rates, already dipping below 6%, might fall further, spurring homebuying activity frozen by 2024’s highs. Stock markets, which have rallied 15% year-to-date on S&P 500 futures, could extend gains in rate-sensitive sectors like technology and real estate. For savers, however, yields on high-yield accounts and CDs—currently averaging 4.5%—face downward pressure, eroding returns on cash holdings.
Borrowers stand to benefit most: Auto loans and credit card rates, tied loosely to the fed funds benchmark, could ease by 0.25%-0.5% over ensuing months. Yet, with only one jobs report left before the meeting, any upside surprise in December’s data could derail the cut, sending bond yields higher and equities into a tailspin.
JPMorgan’s flip not only recaptures the narrative for Fed watchers but also serves as a reminder of monetary policy’s precarious perch. As the December meeting approaches, all eyes will be on incoming data and Powell’s post-meeting presser. For now, the bank’s renewed call for easing offers a dose of optimism in an otherwise taut economic landscape—one where every basis point counts.