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Wall Street has reined in bets on a third straight interest rate cut as the US Federal Reserve’s hawks voice concerns that inflation remains too high to justify lower borrowing costs.

The probability of another quarter point cut, implied by market prices, has fallen from nearly 70 per cent to 40 per cent over the past week after several members of the rate-setting Federal Open Market Committee made plain their lack of support for action at the next meeting on December 10.

The shift — in which investors have also pared back expectations for more cuts in 2026 — contributed to a sell-off in equities and an uptick in two-year Treasury yields this week, amid investor jitters over valuations in AI stocks.

“It is impossible to know which way this goes,” said Krishna Guha, vice-chair at Evercore ISI, on the December Fed vote.

The Fed has lowered borrowing costs by a quarter point at each of its previous two policy meetings on the back of signs that the US labour market is weakening and President Donald Trump’s tariffs are having less impact on inflation than many feared.

But the October vote saw a rare three-way split, with Fed governor and Trump ally Stephen Miran supporting the US president’s calls for lower rates by backing a 50 basis point cut, while Kansas City Fed president Jeff Schmid wanted rates held.

Fed chair Jay Powell warned after the vote that a December cut was not a “foregone conclusion”, while several regional Fed officials without a vote said later that they disagreed with last month’s decision.

“To our ear, the [December] meeting outcome is shaping up to be just as contentious as Powell portrayed in October’s press conference,” said Jonathan Millar, economist at Barclays.

Schmid signalled on Friday that he would continue to support keeping the US central bank’s benchmark rate in a 3.75-4 per cent range, saying neither market nor economic conditions suggested rates were too high.

Susan Collins, the Boston Fed head who is seen as closer to the centre of the FOMC, said earlier in the week that ​​it would “likely be appropriate to keep policy rates at the current level for some time”.

Minneapolis Fed president Neel Kashkari, who — unlike Collins and Schmid — does not currently have a vote on Fed policy, on Thursday pivoted from supporting another cut, saying he would also probably argue in favour of a December hold.

Diane Swonk, chief US economist at KPMG, said there had been “a lot of wishful hoping” among investors that the release of downbeat economic data would force the Fed to cut.

The Bureau of Labor Statistics will publish the September jobs report next Thursday but it remains unclear whether figures on inflation and the labour market for October will be published at all.

“What we’ve really seen is that there is a lot of reticence to cutting aggressively given all of the unknowns out there,” said Swonk. “There is also some inflation coming from the services sector that has just not been eradicated.”

While September’s rise in the consumer price index was weaker than anticipated at 3 per cent year-on-year, price growth remains in excess of the Fed’s 2 per cent inflation goal.

Minutes of the October vote, set for release on Wednesday, could reveal more about divisions within the FOMC.

Whether or not the US central bank opts to end the year with a cut, some analysts say the Fed chair will face a tricky balancing act to minimise the number of dissents.

Doves on the Fed’s board — Chris Waller, Michelle Bowman and Miran, all of whom were appointed by Trump — would probably vote against a decision to hold, raising the prospect of three governors dissenting for the first time since 1988.

“Absent miraculous clarification from limited data, Powell is in a rough spot,” said Guha.

JPMorgan Chase & Co. (NYSE:JPM) ranks among the best financial stocks to buy according to billionaire Ken Fisher. Following an investor meeting with the bank’s Chief Data & Analytics Officer, UBS reaffirmed its Buy rating and $357 price target for JPMorgan Chase & Co. (NYSE:JPM) on November 12. The firm emphasized JPMorgan’s long-term lead in the practical use of AI, pointing out that the bank recently switched to generative AI for new applications.

Supannee Hickman / Shutterstock.com

According to the meeting, JPMorgan’s use of AI is boosting revenue rather than saving costs. Speaking on its conviction regarding artificial intelligence, JPMorgan management stated that AI capabilities will someday become “table stakes” for financial organizations, similar to basic technology requirements like personal computers or internet access.

The LLM Suite, a proprietary platform driven by top third-party large language models (LLMs), is at the center of the bank’s AI revolution. The platform has automated several procedures and provided employees direct access to AI tools.

JPMorgan Chase & Co. (NYSE:JPM) is a multinational financial services company that offers investment banking in addition to consumer and small business financial services. It also offers commercial banking, asset management, and financial transaction processing.

While we acknowledge the potential of JPM as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

READ NEXT: 10 Best Magic Formula Stocks for 2025 and 10 Best Retirement Stocks to Buy According to Hedge Funds.

Disclosure: None. This article is originally published at Insider Monkey.