Macro Mondays – “Will the Fed Cut in December?”

Podcast: Macro Mondays
Host: Andreas Steno Larsen with Co-Host Mikael Rustenwall
Date: November 24, 2025
Episode Theme:
This episode explores the likelihood of the Federal Reserve (Fed) cutting rates at its December meeting, analyzes the internal dynamics and politics at the FOMC, considers market sentiment shifts, potential impacts on liquidity, and ties in the evolving situation in Ukraine. The hosts offer actionable takes on market positioning, balance sheet policy, and the broad macro landscape, weaving in listener questions throughout.

Main Theme Overview

• Will the Federal Reserve cut rates in December?
• Dissecting the political and economic forces within the FOMC
• Interpreting balance sheet discussions and “technical QE”
• Implications for markets: liquidity, Bitcoin, UK fiscal risk, and global events (Ukraine peace process)

Key Discussion Points & Insights

1. Weekly Market Seasonality

• Observation: Mondays/Tuesdays have been strong for markets, with sentiment weakening later in the week—exceptionally so under different US administrations.
• Andreas’s Insight:
  • “My initial thesis seeing this data was that if you look at the weekly seasonality of the Trump administration, they've grown accustomed to deliver upbeat news late Sunday, early Monday while they've typically announced tariffs either Thursday or Friday.” (03:36)

2. Rate Cut Odds and the December FOMC

• Surge in Rate Cut Bets:
  • PolyMarket and other platforms have suddenly shown increased odds of a December rate cut, potentially as a “pump” for risk assets.
  • Andreas cautions against overinterpreting:
    • “A rate cut is not enough on a standalone basis. I think the key question for December is actually the balance sheet.” (05:27)
• Deep Division within the FOMC:
  • Pro-cut members: Waller, Bowman, Mirand, and John Williams (New York Fed)
  • Cautious/hawkish members: Lisa Cook, Michael Barr – focusing on “financial excesses, valuation risks, etc.”
  • Political subtext:
    • “It’s very tempting in my opinion to also pool these pro-cutters and anti-cutters from a political standpoint. Many…appointed by Biden...the left here…appointed by Trump. Very obvious that there's a political game going on now.” (07:26)
  • Importance of Williams:
    • “John Williams is incredibly important to listen to. He's first of all known to be a close ally of Jay Powell...has said they need to expand the balance sheet and I think he’s now also very clearly stated that he’s in favor of cutting near term.” (07:58)

3. Inflation and Regime Model

• Falling Inflation Probability:

  • Mikael references the “regime model” showing the chance of rising US inflation “dropping like a stone.”
  • Andreas clarifies:
    • “We’ve gone from a high probability of inflation actually rising year over year to an almost non-existing probability...So this basically means that we'll probably move from a three handle to a two handle again, right?” (09:38)
  • Implication: If coming inflation data (out day of FOMC) is soft, it “probably seals the deal” for a cut.

• Goldilocks Hopes but Growth Still Lukewarm:

  • Growth is “in a lukewarm territory right now. So we need to see the needle moving on growth as well to really get to a Goldilocks scenario where growth is picking up while inflation is doing nothing.” (10:52)

4. Geopolitics: Ukraine Peace Process

• Flurry of Diplomatic Activity:
  • “The peace process has got new momentum after the leaked peace plan…A lot of momentum here…a plan that both sides are more or less agreeing to.” (12:02)
  • Soft deadline for talks: “as far as I’m concerned, there's a soft deadline on Thursday for these talks.” (13:30)
  • Potentially market-positive if breakthrough occurs, but very uncertain.

Listener Questions: Liquidity, UK Budget Risk, Bitcoin Structure, and Model Portfolio

1. US Liquidity, SOFR Stress & TGA/SLR Developments (14:51)

• Liquidity Still Tight:
  • “We're still, say between friends, a couple hundred billion from going above pain levels again in the overall dollar money market liquidity.” (14:51)
• Balance Sheet & SLR as Next Big Bank Policy:
  • Possible “light technical QE” from Fed to manage repo/liquidity stresses.
  • Supplementary Leverage Ratio (SLR) changes could unlock “at least 250, maybe even 300 billion worth of unlocked capital capacity from these banks. And I actually think the most important conclusion of that is that that capacity will be available for lending.” (18:45)
  • SLR easing allows “private banks to be incentivized to hold Treasuries...sort of an indirect QE, if you know what I mean.” (19:32)
  • Implementation seems likely in Q1 2026.

2. UK Budget & Portfolio Exposure

• Listener (Sir William) concerned over wealth tax and bond revolt:
  • Andreas: “It's getting increasingly hard to be upbeat on the UK outlook, especially fiscally...Rate my scrutinist, you've chosen the wrong place to live. Can I be that blunt? I don't necessarily think it's a biggie for your portfolio.” (20:53)
• Spread between gilts and Treasuries expected to widen further.

3. Bitcoin: Is Market Structure Shifting?

• Could liquidity cease being the main driver?
  • “The big question for 2026 is whether this trend towards the Federal Reserve not being as active with its balance sheet...whether that alters the picture from an asset allocation perspective.” (22:03)
  • “Private bank liquidity is much more likely to go to the real economy, data centers included...less clear that it goes directly into asset inflation.”
  • Next key is the December repo/balance sheet decision; if technical QE is delivered, supportive for Bitcoin “for the next three, four months.” (23:37)

4. Portfolio: Nuclear & Solar in an Economic Slowdown

• Cyclicality:
  • “Those bets are positively correlated to the business cycle. So especially solar is very positively correlated...The question is then, is a slowdown the base case here? I’d say no, but the market has clearly moved in that direction.” (24:46)
  • Manufacturing PMI data giving early signals of possible uptick—“I think there’s a decent chance that we get a spike in the ISM manufacturing once it’s released early next month.” (25:57)

Notable Quotes & Memorable Moments

• “But we might be sometimes maybe good—”
  “—sometimes maybe shit.” [Joke, show’s catchphrase] (02:15)
• “So the simple reason why we're up today is that it's Monday. There's nothing more to it, it's Monday.” (04:07, Andreas)
• “It's very tempting...to pool these pro-cutters and anti-cutters from a political standpoint. Many…appointed by Biden...the left here…appointed by Trump...very obvious that there's a political game going on...” (07:26, Andreas)
• “If we get a soft (inflation) report, that probably seals the deal (for a rate cut).” (10:25, Andreas)
• “We're talking about at least a couple of months of peak QE from the COVID era in terms of how much capital this (SLR change) frees up.” (18:56, Andreas)
• “Rate my scrutinist: You’ve chosen the wrong place to live. Can I be that blunt?” (21:17, Andreas)
• "When you have PTSD from 2008, all you do is expand the balance sheet...I still think they have one expansion left, at least a technical one there, and that should be pretty good news for Bitcoin, at least for the next three, four months." (23:08)
• “I think there's a decent chance that we get a spike in the ISM manufacturing once it's released early next month." (25:57)

Timestamps for Important Segments

• [03:36] – Weekly market seasonality and political news cycles
• [05:27] – Rate cut odds, FOMC divisions, and balance sheet policy
• [09:38] – Inflation regime model readings and implications
• [12:02] – Ukraine peace process and potential market impact
• [14:51] – Listener Q&A: US liquidity stress, SLR, and technical QE
• [20:53] – UK budget risk and asset allocation
• [22:03] – Bitcoin liquidity drivers and potential market structure shift
• [24:46] – Nuclear/Solar bets and cyclical risk
• [25:57] – Preview: Manufacturing PMI as early growth signal

Tone & Takeaway

Steno and Mikael offer an expert yet light-hearted review of fast-moving macro themes. The episode provides actionable insight but remains refreshingly candid about uncertainties (“sometimes maybe good, sometimes maybe shit”). The central message: December’s FOMC is make-or-break—not just for rates, but for strategic liquidity policy, which will ripple into risk assets, currencies, and global macro bets well into 2026.

Essential for listeners seeking a nuanced, real-time breakdown—especially those trading around Fed events, liquidity stress, and geopolitical shifts.