Divided Fed and Data Discrepancies Cloud Prospects for December Rate Reduction

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Divided Fed and Data Discrepancies Cloud Prospects for December Rate Reduction

Bitget-RWA2025/11/19 01:34

By:Bitget-RWA

- The U.S. Federal Reserve faces pressure to cut rates in December amid stable inflation (2.7%) and cooling labor markets, despite internal divisions and data gaps from the government shutdown. - FOMC dissenters oppose cuts, with officials like Jeff Schmid against reductions and Stephen Miran advocating a 50-basis-point cut, complicating market expectations. - Delayed economic data, including October nonfarm payrolls, and global factors like China's stimulus and Latin American slowdowns, heighten uncertain

The U.S. Federal Reserve is under growing pressure to lower interest rates in December, as market sentiment increasingly anticipates such a move—even though policymakers remain divided and recent government shutdowns have caused data delays. With inflation appearing to stabilize and the job market showing signs of cooling, many analysts believe the central bank now has sufficient grounds to begin another round of rate reductions, despite officials’ ongoing caution about possible risks.

Recent consumer price index (CPI) figures

have strengthened the case for a rate reduction

, with annual inflation steady at 2.7% for November.

Core inflation, which strips out the more volatile food and energy categories

, also held at 3.3%, matching expectations and helping to ease worries about renewed inflationary pressures. "The minor increase in overall prices doesn’t signal a reversal in trend,"

commented Scott Helfstein

, head of investment strategy at Global X. At the same time,

minutes from the Federal Open Market Committee (FOMC)

meeting in October revealed disagreements, with two members voting against the 25-basis-point reduction. Kansas City Fed President Jeff Schmid, one of the dissenters, opposed any cut, while Governor Stephen Miran pushed for a larger, half-point reduction. These differing views have led traders to remain cautious, with

the odds of a December rate cut now close to 50%

, down from more than 66% just a week ago.

The uncertainty is heightened by delays in key economic reports caused by the government shutdown.

Jobless claims for mid-October jumped to 232,000

, surpassing forecasts and pointing to a softer labor market.

The Labor Department’s postponed releases

, such as October’s nonfarm payrolls, have forced analysts to turn to alternative data sources to assess the economy. This lack of timely data has complicated the Fed’s policy decisions, with Chair Jerome Powell recently emphasizing that a December rate cut is "not a certainty."

Divided Fed and Data Discrepancies Cloud Prospects for December Rate Reduction image 0

International developments are also influencing the outlook.

China’s latest stimulus measures

, including rate reductions and economic incentives, have increased global demand for commodities and eased the strain on U.S. farm exports. This comes after a Trump-Xi trade agreement that helped prevent a crisis for American agriculture, although

the Fed’s policy choices remain complicated

by the shutdown’s impact on BLS data gathering. In addition,

economies in Latin America, such as Brazil and Mexico

, are showing signs of slowing growth, further fueling worries about the global economic outlook.

The Federal Reserve’s upcoming decision will depend on whether the recent easing of inflation and labor market weakness outweigh ongoing risks like stubbornly high services inflation and global instability. Although a December rate cut is becoming more probable,

a pause in January is now the more likely scenario

, with many economists expecting a slower pace of rate reductions in 2025 as the central bank tries to balance curbing inflation with preventing a downturn.

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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