Powell Cautions Markets on December Rate Cut
- Buster Wurm
- 2 hours ago
- 2 min read
Last Wednesday, October 29th at 2:00 pm, following the two-day Federal Open Market Committee (FOMC) meeting, the Fed announced a 25-basis-point cut. This marked its second consecutive rate cut. The cut was largely in line with market expectations. However, the 2:30 pm press conference revealed a shift in tone from Chair Jerome Powell and the broader FOMC committee.
The Federal Reserve is signaling a more cautious approach as it heads into the December meeting. In a decisive press conference, Powell warned investors that another reduction in the federal funds rate is “not a foregone conclusion.” He underscored growing divisions among policymakers over how far to go in supporting a cooling labor market without reigniting inflation.
The FOMC voted 10-2 to lower its benchmark rate, but dissent has been emerging on both sides. Fed Governor Stephen Miran pushed for a deeper 50-point cut. Jeffrey R. Schmid, President of the Kansas City Fed, preferred to pause. This reveals a central bank increasingly split on the right pace of easing. The decision arrives amid a government shutdown that has frozen the release of key economic data. As a result, the Fed is forced to rely on private and state-level indicators to gauge labor and inflation trends.
Still, Powell’s tone suggests that the Fed remains attentive to labor-market weakness. Companies such as Amazon, General Motors, and Applied Materials have recently announced headcount reductions. This prompts concerns that a demand-driven slowdown could intensify without further support. Powell emphasized that the Fed “should use our tools to support the labor market when we see this happening.” He hinted that additional easing remains possible if job losses accelerate.
As of the time of writing, CME’s Fed Watch predicts the odds of another rate cut in December at roughly 60-70%. This is far from certain and signals skepticism from the broader market. As the government remains closed, the lack of precise data will keep a cloud of uncertainty over the true state of the economy. Private organizations, such as ADP, attempt to provide clarity on the current situation. The Fed will need to see impactful data emerge before making any further decisions this coming December.
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