Fed Officials Split as Powell Weighs December Interest Rate Cut

Federal Reserve Chair Jerome Powell is laying the groundwork for a possible interest rate cut at the upcoming December 9–10 policy meeting, according to a report from the Wall Street Journal’s Nick Timiraos. However, the path forward is far from smooth, with growing divisions inside the Federal Open Market Committee and limited fresh economic data complicating the decision.

Powell is reportedly considering two primary strategies. The first would involve cutting rates in December, then taking a more cautious stance in early 2025. The second option is to pause for now and re-evaluate in January once more data is available. Both approaches are likely to face pushback from committee members who hold differing views on inflation, labor conditions, and the economic outlook.

Support for a December cut strengthened after New York Fed President John Williams signaled he favored lowering rates to prevent further softening in the labor market. A move next month would also align with Powell’s broader easing trajectory, following rate cuts at the past two meetings.

But several Fed officials remain hesitant, stressing that inflation pressures have not fully subsided and the job market still shows resilience. Their caution is amplified by the absence of October inflation and employment data due to a prolonged government shutdown. These missing reports would have been the last major indicators guiding the Fed’s final decision of the year.

Financial markets, however, are increasingly confident a rate cut is coming. According to the CME FedWatch Tool, traders now assign a 79.7% probability to a 25-basis-point reduction in December, up sharply from 49.8% just one week earlier.

As the Fed navigates its final meeting of 2024, Powell faces the challenge of balancing economic uncertainty, internal disagreements, and growing market expectations—all while shaping the central bank’s monetary direction heading into the new year.