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PULSE - December 09, 2025
Dovish Pivot and Cross-Border Capital Flows Reshape Investor Narratives
Fed's Dovish Tilt Gains Momentum Amid Labor Market Concerns
The Federal Reserve enters its December 9-10 policy meeting facing a familiar dilemma, though the balance of forces appears to have shifted decisively toward accommodation. Perscient's semantic signature tracking advocacy for easier monetary policy rose by 0.37 to a z-score of 0.98 this week, reflecting stronger than average language calling for the Fed to lower rates. Meanwhile, the signature tracking calls for tighter policy remained subdued at -0.55, suggesting limited media attention to hawkish arguments.
Market participants have largely made up their minds. According to Reuters polling, a majority of over 100 economists surveyed expect the Fed to reduce its key interest rate by a quarter-percentage point to support a cooling labor market. Fed funds futures suggest approximately 87% probability of such a cut materializing this week.
Yet beneath this apparent consensus lies unusual discord among policymakers themselves. Fortune reports that Chair Jerome Powell faces a credibility challenge in navigating between hawks and doves at what analysts describe as "the most divided Fed in recent memory." Bank of America analysts noted it will be "difficult for Powell to send a credibly hawkish signal at the press conference."
The division stems from genuinely conflicting economic signals. Inflation persists at 3%, well above the Fed's 2% target, while labor market data has deteriorated. Fox Business reports that weak job market data and rising layoffs complicate the outlook. The Fed delivered a second straight reduction in October, driven by what observers characterized as a sudden deterioration in employment conditions over the summer.