Traders are no longer focused on whether the Federal Reserve will cut rates this week—a near certainty priced in by markets—but rather on the subtle signals in the central bank's statement and Chair Jerome Powell's tone during his press conference.

According to the CME FedWatch Tool, there’s a 90% probability of another rate cut at this week’s FOMC meeting. However, Wall Street has already digested this expectation, with the S&P 500 hovering near record highs. The real focus now is on whether Powell will describe policy as "in a good place," a phrase analysts at Jefferies say could indicate reluctance to cut further in January.

Thomas Simons and Michael Bacolas of Jefferies highlight that if Powell avoids this phrasing, it may leave the door open for additional easing next year. "The key question is whether Powell will echo the 'in a good place' language used earlier this year when the Fed paused, or stick with terms like 'moderately restrictive,'" they noted in a client report.

Powell remains data-dependent, meaning January’s decision will hinge on incoming economic indicators. Yet, he isn’t the sole decision-maker—the FOMC is deeply divided. Roughly half of its members fear further easing could inflate asset bubbles, while the other half warn of recession risks amid rising unemployment.

Macquarie analysts David Doyle and Chinara Azizova point out that at the last meeting, eight of 19 participants believed rates should already be lower (3.5%-3.75% vs. the current 3.75%). "This split could resurface in December’s projections," they said.

Gold Sachs economist David Mericle expects dissenting votes, particularly from hawks, but doubts they’ll significantly shift market expectations. Meanwhile, weakening labor data—highlighted by declining job openings in the Fed’s Beige Book—could push the Fed toward a risk-management stance.

Private-sector reports reinforce concerns: ADP, Revelio Labs, and Challenger, Gray & Christmas all show recent job declines, with November layoffs up 24% year-over-year. If the labor market deteriorates further, Powell is less likely to declare policy "in a good place," raising odds of additional 2026 rate cuts.