Fed's Policy Direction Shifts: Balancing Prudence and Swift Action in Crucial December Decision

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Fed's Policy Direction Shifts: Balancing Prudence and Swift Action in Crucial December Decision

Bitget-RWA2025/11/17 00:30

By:Bitget-RWA

- Fed faces 52% market odds of 25-basis-point rate cut at Dec 10 meeting, down sharply from 95% a month ago amid internal divisions. - Key officials like Collins and Kashkari oppose further easing without clearer labor market deterioration or inflation control below 3%. - Government shutdown delays critical data, forcing policymakers to rely on incomplete information and private-sector indicators. - Uncertainty risks asset markets: Bitcoin stagnates near $103k while real estate and growth stocks face headw

The Federal Reserve's decision on whether to cut rates in December has turned into a tense standoff, with market probabilities near 50% and growing disagreements among Fed officials. According to the CME FedWatch tool, financial markets currently assign

a 52% likelihood of a 25-basis-point rate cut

at the central bank’s December 10 meeting—a significant drop from 95% just a month earlier. This uncertainty highlights the divided policy environment, as policymakers contend with inflation stuck above 3%, a government shutdown that has postponed vital economic data, and conflicting opinions about the best course of action.

The Fed’s reluctance stems from a rising number of officials taking a more hawkish stance. Boston Fed President Susan Collins, who played a key role in the October rate cut, has changed her position, saying she would not support further easing unless there is “significant weakening in the labor market”

according to her statement

. San Francisco Fed President Mary Daly, previously a strong supporter of rate cuts, now describes a December move as “too soon,” while Minneapolis Fed President Neel Kashkari has publicly opposed recent cuts,

cautioning that inflation is still “excessively high”

and that lowering rates could jeopardize the Fed’s 2% inflation goal. These warnings have caused market expectations to shift,

with short-term interest rate futures now indicating a 60% probability

of no rate cut, as reported by Reuters.

Fed's Policy Direction Shifts: Balancing Prudence and Swift Action in Crucial December Decision image 0

Adding to the challenge is the lack of up-to-date data. The government shutdown has postponed essential reports on inflation and employment, forcing policymakers to make decisions with incomplete information. Collins specifically mentioned this “limited information” as a reason to hold off, while

Fed Chair Jerome Powell emphasized the importance

of moving carefully until the data “fog” dissipates. In this information gap, private sector data and anecdotal reports have taken on greater significance, with experts like Apollo Global’s chief economist Torsten Slok pointing out that

55% of items in the Consumer Price Index are still increasing

at a rate above 3%.

The implications go beyond just monetary policy. Delaying a rate cut could limit gains in riskier assets, especially cryptocurrencies.

Bitcoin

, which is trading close to $103,000, has shown little

upward movement

as investors assess the Fed’s next steps

according to Coindesk

. Likewise, industries that are sensitive to interest rates—such as real estate and growth-oriented stocks—are facing obstacles, while banks and other financial firms could benefit from a longer period of higher rates

according to market analysis

With December drawing near, the Fed’s direction remains uncertain. As Krishna Guha of Evercore ISI noted, Collins’ open opposition raises doubts about Powell’s ability to keep the Federal Open Market Committee unified, especially after several split votes this year

according to Reuters reporting

. The final decision will depend on upcoming data, but for now, the Fed’s policy direction swings between restraint and the need for action.

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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