The likelihood of a Federal Reserve rate cut in December is growing after two influential central bank leaders voiced support for lowering rates, according to new reporting from Realtor.com.
In recent remarks, New York Fed President John Williams a permanent voter on the Federal Open Market Committee (FOMC) and one of Chair Jerome Powell’s closest policy allies suggested that interest rates may not need to stay at current levels for much longer. Williams said he sees space for rates to move lower “in the near term,” a clear sign that easing could be on the table at the next meeting.
Backing that sentiment, San Francisco Fed President Mary Daly told the Wall Street Journal she supports cutting rates at the upcoming meeting. While Daly does not vote on the FOMC this year, she has historically aligned closely with Chair Powell, adding to expectations that leadership may be building consensus for another cut.
These comments quickly shifted market expectations. The probability of a quarter-point rate reduction in December jumped from roughly even odds early last week to around 85% by Tuesday, the Journal reported.
Internal Fed Divide Remains
Despite the growing momentum, not all policymakers agree that another cut is warranted. The Journal noted that Boston Fed President Susan Collins and St. Louis Fed President Jeff Schmid have both expressed hesitation. Their concern centers on persistent inflation risks, suggesting they may vote against lowering the federal funds rate again this year.
The Fed’s next rate-setting meeting is scheduled for December 10, leaving time for additional data and debate to influence the final decision.
Why This Matters for Mortgage Rates
The Fed does not directly set mortgage rates, but expectations about its policy direction heavily influence longer-term borrowing costs.
When markets sense that rate cuts are more likely, yields on government bonds especially the 10-year Treasury, which is closely tied to mortgage rates tend to dip. That’s exactly what happened after Williams’ remarks, with Treasury yields easing as investors reacted.
Mortgage rates recently reached their lowest level in a year, falling to 6.17% in late October after the Fed issued back-to-back cuts at earlier meetings.
A December rate cut could help keep mortgage rates from drifting higher, though outcomes depend on broader economic signals in the days ahead.
Williams Offers the Strongest Clue Yet
Speaking at a conference hosted by the Central Bank of Chile, Williams gave perhaps the most telling hint of where policy may be headed.
“I view monetary policy as being modestly restrictive,” he said. “Therefore, I still see room for a further adjustment in the near term to move the stance closer to neutral.”
This comment suggests the Fed may see less need to keep policy tight, especially as the labor market cools and inflation shows signs of relief.
What Could Still Shift the Outlook?
While the trend is pointed toward a December cut, uncertainty remains. Realtor.com Senior Economist Jake Krimmel noted that momentum could shift if new data shows unexpected inflation or a sudden rebound in the labor market.
“It’s hard to think of something that would reverse the momentum toward a cut we’ve seen this week,” Krimmel said. “But there are still over two weeks until the meeting, which can be an eternity in this uncertain macro environment.”
A significant surprise in economic data or vocal opposition from additional Fed members would be the most likely factors to change the current trajectory. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.
