Fed Chair Powell Says December Interest Rate Cut Is ‘Far From’ Guaranteed

The Federal Reserve’s policy committee won’t necessarily cut interest rates in December, contrary to what financial markets had expected.

Federal Reserve Chair Jerome Powell upended financial market bets that the Fed’s policy committee would lower its benchmark interest rate for a third consecutive meeting in December. Speaking at a press conference following the Fed’s decision to cut rates by a quarter-point on Wednesday, Powell said that the rate-cutting campaign would not necessarily continue into December, as had been widely forecast.

“A further reduction in the policy rate at the December meeting is not a foregone conclusion, far from it,” Powell said. “There were strongly different views today. And the takeaway from that is that we haven’t made a decision about December.”

Powell’s comments underscored that the central bank’s decision-makers are divided on how to handle its current dilemma.

Fed officials are torn between lowering the fed funds rate to boost the economy and rescue the stumbling job market, and keeping it higher for longer to slow the economy and fight inflation. To make matters trickier, the ongoing government shutdown has cut off the data from statistical agencies that the Fed usually relies on to make its decisions.

Some members of the Fed’s 12-member policy committee have expressed a preference for more rapid rate cuts, while others have advocated for a more cautious approach. Those divisions came to the fore Wednesday when two voters deviated from the majority consensus for a quarter-point rate cut in opposite directions.

As of Wednesday afternoon, there was a 56% chance of a rate cut in December, down from 90% the day before, according to the CME Group’s FedWatch tool, which forecasts rate movements based on fed funds futures trading data.

Stocks fell during the press conference. The benchmark S&P 500, which had reached a record intraday high before Powell began speaking, was down 0.2% by 3:45 p.m. Eastern Time.

Powell acknowledged the Fed’s difficult position, where economic trends are pulling monetary policy in opposite directions.

“We have the situation where the risks are to the upside for inflation and to the downside for employment,” Powell said. “We have one tool … you can’t address both those at once.”