Everyone knows the Fed is cutting rates again. The December 10 meeting has a 25-basis-point reduction baked in with nearly 90% certainty, according to CME FedWatch data. This would mark the third consecutive interest-rate cut.

But here's the thing: the cut itself might be the least interesting part of the whole affair.

What should actually have traders' attention are two other elements of the meeting: the Fed's updated economic projections and Chair Jerome Powell's commentary. Together, they could reveal a central bank far less dovish than the rate cut suggests, setting up what analysts are calling a "hawkish cut" scenario.

The Cut Is Coming, But the Mood Is Shifting

Peter Williams, an analyst at 22V Research, expects the Fed to deliver one more cut before pumping the brakes on its easing cycle. He anticipates Powell will signal that "this second set of risk management cuts by the FOMC is likely done for now," emphasizing that more decisive data will be needed before the Fed moves away from its modestly restrictive stance.

The dissents tell their own story. Williams expects Kansas City Fed President Jeffrey Schmid to vote against any cut, while Governor Stephen Miran may dissent dovishly by pushing for a 50-basis-point reduction. Beyond that, new hawkish dissents could emerge from officials like Boston Fed President Susan Collins, Chicago Fed President Austan Goolsbee, or St. Louis Fed President Alberto Musalem, all of whom have recently downplayed the urgency of further easing.

"There is simply no way for Powell to avoid the disagreements, both formal dissents and the broader bevy of Fedspeak we will get before the holidays," Williams notes.

The Summary of Economic Projections should show marginally better growth, slightly lower inflation, and roughly unchanged unemployment forecasts compared to September. Nothing dramatic, but the subtle shifts matter when the Fed is this divided.

"The fundamental challenge for Powell in the lead up and in communicating the results of this meeting is that there is very little consensus on the FOMC about the near-term outlook for policy," Williams says.

The Dot Plot Could Be the Market Mover

Williams suggests the doves have won the battle for December's preemptive cut, but that victory may be their last for a while. With rates approaching neutral territory and the labor market scare from earlier this fall fading, the Fed appears ready to shift into a slower, more data-dependent mode.

"The dot plot for 2026 will likely show a single cut median," he adds.

That's a significant hawkish lean. Williams expects eight officials to favor unchanged rates above the 2026 median, and a few may even pencil in a rate hike. If that projection comes through, it would signal a Fed far less eager to ease than markets might hope.

Is It Time to Hedge?

The setup heading into this meeting has an uncomfortably familiar feel. The CBOE Volatility Index has dropped back to the same low levels that preceded sharp spikes in both October and December of last year. Meanwhile, stocks have rallied to familiar resistance zones, and Treasury yields have already climbed into the meeting.

The Vanguard S&P 500 ETF (VOO) trades less than one percentage point below record highs. Everything looks calm, which is often when things get interesting.

"The volatility and technical setup now looks very similar to the setup we had back at the end of October before the last Fed decision," said Jeff Jacobson, quantitative analyst at 22V Research.

He points out that "VIX essentially bottomed right before the Fed meeting and then spiked again in November as stocks came under pressure," and reminds investors that "we have had two moves where the VIX has doubled in short order."

"Now is a time you want to own volatility and/or hedges," he added.

The case for hedging boils down to this: the cut is priced in, but the messaging isn't. If Powell leans hawkish or the dot plot shows a Fed ready to pause for an extended period, markets could react sharply. And with stocks at elevated levels and volatility at subdued levels, the risk-reward on downside protection looks compelling.

So yes, traders may get their third straight rate cut. But the real story is a central bank entering a new phase marked by internal disagreement, weaker forward guidance, and far less certainty about what comes next. For markets used to clear Fed signals, that ambiguity is a volatility catalyst all on its own.