"New Fed News Agency": Regardless of whether there is a rate cut, the December Fed meeting may have at least three dissenting votes.

"New Fed News Agency": Regardless of whether there is a rate cut, the December Fed meeting may have at least three dissenting votes.

Nick Timiraos, a well-known financial journalist often referred to as the "New Fed Communicator," wrote that Federal Reserve officials are facing a challenge—how to bridge internal differences over the interest rate path and make difficult decisions in the absence of new economic data for reference.

Timiraos pointed out that Fed Vice Chair Philip Jefferson’s speech on Monday epitomized this dilemma:

He acknowledged that the risks of persistent inflation and weakening employment exist simultaneously—two major threats pointing to completely opposite policy prescriptions. Jefferson said: “The shifting balance of risks underscores the need to be cautious and proceed gradually with rate cuts.”

Aside from this, his speech did not clearly provide additional reasons for either “holding steady for an extended period” or “cutting rates again next month,” even as the debate between these two choices is now more heated than ever.

Timiraos noted that as a member of the Fed leadership, Jefferson typically supports Chair Powell’s stance, and Powell will be key to coordinating the highly divided policy committee next month.

Market expectations for a rate cut at the Fed’s December 9–10 meeting have continued to decline in recent weeks—a rare occurrence during a period without any major economic data releases. According to CME data, the market-implied probability of a rate cut is currently about 45%, down from 60% a week ago, and far below the 90% level during the October meeting.

On Monday, Jefferson reiterated that he believes rates remain at a “somewhat restrictive” level, which is holding back U.S. economic growth—but recent rate cuts have brought rates closer to the “neutral” range, where policy neither stimulates nor restrains economic activity.

Timiraos said that the Fed cut rates at both the September and October meetings, but the data blackout caused by the government shutdown has made intensifying disagreements among policymakers difficult to resolve. Several officials who previously supported rate cuts stated last week that unless there is a deterioration in employment or an improvement in inflation, they will oppose further rate cuts. It remains unclear whether such data will be available before the next meeting.

Timiraos listed the camps within the Fed opposing or supporting a December rate cut:

  • One group of officials is more concerned about inflation risks. U.S. inflation has been above the Fed’s 2% target for four consecutive years. They worry that new price pressures caused by tariffs will keep inflation above target for the next two years and are uneasy about further easing financial conditions under these circumstances. This camp has recently expanded, now including four regional Fed presidents with voting rights this year, as well as Fed Governor Michael Barr.
  • The other group of officials—including all three Fed governors appointed by Trump—are more focused on the labor market. They fear that colleagues are giving too much weight to high inflation risks, which could lead to a recession that is entirely avoidable, and they believe the risk of persistent high inflation is actually quite low.

Timiraos cited Waller’s speech on Monday:

Businesses have been hiring slowly and laying off cautiously for more than a year, but Waller said he is worried that more companies plan to cut spending, which would disrupt the current delicate balance. They have begun talking about layoffs.

Weak consumer confidence, sluggish wage growth, and subdued demand for big-ticket items like homes and cars all suggest that the economy still faces hidden headwinds—and those headwinds may limit the likelihood of accelerating inflation.

Timiraos concluded that the result is Powell faces an almost impossible task: to forge the usual broad consensus amid severe divisions:

No matter the outcome, the December FOMC meeting could see at least three dissenting votes—if rates are held steady, all three Trump-appointed governors are expected to dissent; if rates are cut by 25 basis points, another camp of at least three officials could oppose the move.

 

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