The Federal Reserve's December rate cut decision hangs in the balance, with policymakers divided over further rate cuts amid inflation concerns. Boston Fed President Susan Collins signals a high bar for additional easing, while market odds for a December rate cut drop to 47%. Fed Vice Chair Philip Jefferson and others have expressed caution about further cuts, citing the need for a more measured approach due to the lack of official data. This growing reticence among policymakers is pushing financial market-based odds of a reduction in borrowing costs in December below 50%.
San Francisco Fed President Mary Daly, a firm supporter of the Fed's rate cuts, has expressed a cautious stance, stating that any decision four weeks before the next policy meeting is premature. Minneapolis Fed President Neel Kashkari, who previously supported a third rate cut, now describes the latest economic signals as mixed, indicating a shift in his position. The lack of consensus around another reduction in borrowing costs is evident, with Collins' blunt remarks suggesting deepening divisions at the U.S. central bank.
The December meeting may see more dissents than the two cast against the rate cut last month. Kansas City Fed President Jeffrey Schmid and Fed Governor Stephen Miran have already expressed differing opinions. If the FOMC decides to hold rates steady, Miran could be joined by other Trump-appointed governors in a dissent. The economic data is not decisive, with private sector data and surveys providing mixed signals. While U.S. firms were shedding jobs, private data on inflation is hard to come by, and the Fed's 2% inflation target makes rate cuts challenging.
