Fed Policymakers Disagree on Balancing Inflation and Employment in December Rate Cut Discussion

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Fed Policymakers Disagree on Balancing Inflation and Employment in December Rate Cut Discussion

Bitget-RWA2025/11/24 17:26

By:Bitget-RWA

- Fed officials clash over December rate cut amid resilient economy and stubborn inflation, with Boston's Collins and Dallas' Logan urging caution while New York's Williams supports flexibility. - Market pricing for a 25-basis-point cut rose to 70% after Williams' dovish remarks, contrasting with Collins' emphasis on monitoring labor market slowdown risks. - Government shutdown delays key data like October CPI, complicating policy decisions as officials rely on outdated metrics to balance inflation control

Talks of a possible rate cut by the Federal Reserve in December have sparked intense internal discussions, with policymakers split over whether to loosen monetary policy as the economy remains robust and inflation persists. The upcoming December 9-10 meeting is shaping up to be a crucial event, as officials balance the risks posed by a tight labor market with the ongoing effort to bring inflation down to the 2% goal.

Susan Collins, President of the Federal Reserve Bank of Boston, has been a prominent voice of caution, telling CNBC that "a restrictive policy stance is still very suitable at this time" and showing

reluctance about additional rate reductions

. Her perspective is echoed by Dallas Fed President Lorie Logan, who has suggested that the central bank should "hold off" on further cuts until there is more definitive progress on inflation

as she stated

. Although Logan does not have a vote this year, she noted that the two 25-basis-point reductions since September might have already shifted policy away from being sufficiently restrictive.

On the other hand, John Williams, President of the New York Fed and a permanent voter on the FOMC, has indicated a willingness to consider a rate cut in the near future. Speaking at a Central Bank of Chile event, Williams said the Fed could lower rates without compromising its inflation objectives, pointing out that

inflationary pressures are likely to diminish

as the effects of tariffs subside. His remarks have fueled market optimism, with traders now assigning a 70% probability to a 25-basis-point cut in December, up from 37% earlier in the week

based on market assessments

This split highlights the broader uncertainty within the FOMC. With the federal funds rate currently at 3.75%-4.00% following two back-to-back cuts, officials

are missing up-to-date critical data

due to the government shutdown, making it harder to evaluate the economic outlook. Collins pointed to mixed job numbers from September and stressed the importance of watching the labor market for any signs of slowing, while Williams cited a 4.4% unemployment rate—comparable to pre-pandemic figures—as an indication of a stable job market

according to recent economic reports

Mohamed El-Erian, Allianz’s chief economic adviser, urged investors not to overreact to Williams’ more dovish tone, warning that the FOMC still faces "significant challenges" in reaching a consensus

as noted in market commentary

. The absence of recent inflation statistics, including the delayed October CPI release, adds to the uncertainty, forcing policymakers to rely on older data.

This ongoing debate highlights the Fed’s challenge: cutting rates to prevent possible labor market deterioration while making sure inflation continues to fall. With figures like Collins and Logan urging restraint and Williams advocating for adaptability, the December meeting could see an unusual split among policymakers, possibly resulting in dissent.

At present, markets remain unsettled. The S&P 500 inched up on Friday as investors processed the mixed messages, but overall sentiment remains fragile amid persistent economic uncertainty

according to market assessments

. As the Fed approaches this critical juncture, its decision will likely influence the direction of U.S. monetary policy in 2026.

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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