Citing ongoing inflation and indications of labor market stability, an increasing number of Federal Reserve members are expressing reluctance to further reduce interest rates. Due to growing uncertainty, market expectations for a rate decrease in December have already fallen below 50%.
Previously in favor of easing, Mary Daly of the San Francisco Fed stated that any decision made before the December meeting is "premature."
Neel Kashkari of the Minneapolis Fed expressed skepticism as well, pointing out that mixed economic indicators and inflation are still close to 3%.
The probability of a rate cut on December 10 is now at 47%, down from 67% earlier this week, according to short term rate futures. Traders have lowered their expectations due to conflicting economic indications and remarks made by authorities.
Susan Collins, president of the Boston Fed, stated that unless the labor market clearly deteriorates, she sees a "high bar" for further easing. Her direct comments underscore the uncertainty facing policymakers and indicate growing divides within the Fed.
Regardless of the outcome in December, Fed Chair Jerome Powell might see additional opposition. While some politicians advocate for more drastic cuts, others advise caution when it comes to inflation. Decisions about policy may become more controversial as a result of this widening gap.
While sales-tax data indicates economic resiliency, private-sector employment data reveals that American companies are eliminating over 11,000 positions per week. Policymakers must rely on incomplete indications because official data is scarce as a result of the government shutdown.
More than half of the products in the CPI basket are expected to have price increases of more than 3%, according to analysts.
Sticky inflation is a major factor in why policymakers believe a December decrease may be hard to defend given the Fed's 2% target.
