Traders Doubt a December Rate Cut as Fed Leaders Show Different Views

Post by : Saif

The debate over the next U.S. interest rate move grew stronger on Friday as top Federal Reserve officials shared very different opinions. Some leaders said they are worried about inflation and want to pause any further rate cuts. But one senior member argued that the economy still needs lower rates. This disagreement has created confusion in financial markets and changed what traders expect ahead of the December 9–10 Fed meeting.

Because of the recent government shutdown, many economic reports were delayed. On Friday, U.S. agencies announced that they will soon begin releasing these reports again. This new information could quickly change the outlook for the Fed’s next decision.

For now, traders are betting that the Fed will not cut rates in December. Late Friday, short-term interest-rate futures showed a 60% chance that there will be no new cut. This is a big change from just a day earlier, when traders were split 50-50. Before that, most traders strongly believed another cut was coming after the Fed lowered rates in both September and October.

The sharp change in market thinking comes from the mixed signals given by Fed officials.

Kansas City Fed President Jeffrey Schmid, Dallas Fed President Lorie Logan, and Cleveland Fed President Beth Hammack all repeated their hawkish views. This means they believe interest rates should stay high to fight inflation. Hammack said she does not see a clear reason for more policy action right now. Logan added that she cannot support another cut unless inflation falls much faster or the job market weakens more than expected.

Schmid explained that he opposed the October rate cut because he believes more cuts will not fix the real problems in the job market. He said these problems are caused by deeper issues such as changes in technology and immigration, not interest-rate levels. He warned that too many cuts might raise doubts about the Fed’s long-term promise to keep inflation at 2%.

On the other side, Fed Governor Stephen Miran is strongly in favor of another cut. Speaking on television, he said the current economic data supports lowering rates again. Miran had pushed for a bigger cut in October but was outvoted. He shares President Donald Trump’s view that interest rates are still too high and are putting pressure on workers and businesses.

Miran will return to his job as a White House economic adviser in January when his Fed term ends. His comments suggest that the debate inside the Fed will remain intense until the December meeting.

Fed Chair Jerome Powell said after the October cut that the earlier moves were meant to protect the economy in case the job market gets worse. But because the shutdown delayed important data, he warned that the Fed needs to move carefully until the “fog” clears.

The next few weeks will be critical. Once the delayed economic data is released and more Fed leaders share their thoughts, traders may change their expectations again. For now, the December decision looks uncertain, with strong arguments on both sides and a market that is shifting quickly based on every new signal.

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