The Federal Reserve's upcoming meeting is expected to be one of the most contentious in years, with investors focusing on two key aspects: the extent of policymakers' disagreement over "anticipated rate cuts" and the signals Chair Jerome Powell sends about future policy direction.

Among the 12 voting members of the Federal Open Market Committee (FOMC), five have expressed opposition or skepticism toward further easing, while three members of the Fed's Washington-based Board of Governors support rate cuts. Since 2019, the FOMC has not seen three or more dissenting votes in a single meeting—a scenario that has occurred only nine times since 1990.

This divergence has drawn attention to the "dissent factor," as investors seek clues about the Fed's policy trajectory and internal dynamics during the Tuesday-Wednesday meeting. "The level of disagreement within the Fed appears to be at its highest in a long time," said Michael Rosen, CIO of Angeles Investments. "The depth of this divide will be critical to watch, as it may reveal the Fed's future policy leanings."

Rosen added that uncertainty stems from the Fed's challenge in balancing its dual mandate of "maximum employment" and "stable inflation." Friday's data showed inflation, as measured by the PCE price index, aligned with expectations, while U.S. consumer confidence improved in December. These reports did not alter market expectations for a Fed rate cut next week.

Thursday's economic data revealed that initial jobless claims fell to their lowest level in over three years, easing concerns about a sharp labor market downturn and further supporting rate-cut expectations. The Chicago Fed estimates November's unemployment rate held steady around 4.4%. According to LSEG data, markets currently price in an 84% chance of a 25-basis-point rate cut next week.

The Fed last cut rates on October 29, lowering the target range to 3.75%-4.00%—its second consecutive 25-basis-point reduction this year. Powell later unsettled markets by stating that a December cut was "not a done deal," causing stocks to pare gains as investors had largely priced in easing.

Janus Henderson portfolio manager Jeremy Buckley downplayed the meeting's long-term impact: "Short-term volatility is possible, but the Fed's actions in the first half of 2026 matter more than December's decision." The S&P 500 has gained 16.6% year-to-date, and Wilmington Trust CIO Tony Roth believes even a rate cut would have limited market impact. "Markets have largely priced in easing—what truly matters is the Fed's forward guidance," Roth said, adding that policymakers will likely emphasize data dependence.

Complicating the Fed's deliberations is a backlog of economic data. The longest U.S. government shutdown (43 days) delayed November's nonfarm payrolls report until December 16—after policymakers meet. October's unemployment rate remains unknown due to suspended household survey data collection. While outdated, the December 9 JOLTS report may still offer insights into October labor trends, particularly layoffs amid low hiring and firing activity.

Some observers argue the likelihood of a cut is lower than markets suggest, focusing instead on Powell's messaging and the vote margin. "We see no foregone conclusion," said David Seif, Nomura's chief developed markets economist. "Markets underestimate the risk of the Fed holding rates steady in December." Seif noted dissenting votes would be telling, especially with four regional Fed presidents rotating off soon—their stances may reflect their willingness to assert independence and pressure the central bank. "This dissent could shape whether Fed decision-making evolves into a simple one-member-one-vote mechanism," he added.