Federal Reserve Chair Jerome Powell made it clear on Wednesday that a further interest rate cut at the December meeting is not assured, pushing back against widespread expectations on Wall Street.
Powell dampens December hopes
At a press conference following the Fed’s quarter-point rate cut, Powell stated:
“A further reduction in the policy rate at the December meeting is not a foregone conclusion, far from it. There were strongly different views today. And the takeaway from that is that we haven’t made a decision about December.”
Prior to Powell’s remarks, financial markets had priced in a 90% probability of a December rate cut.
That figure plunged to 56% by Wednesday afternoon after Powell’s comments, according to CME Group’s FedWatch tool.
Policy divisions emerge
The Federal Open Market Committee remains split on the path forward.
Two committee members dissented on Wednesday’s decision, one favoring a larger cut and another preferring to hold rates steady. Powell noted the committee’s internal divisions:
“We have the situation where the risks are to the upside for inflation and to the downside for employment. We have one tool … you can’t address both those at once.”
Data uncertainty clouds outlook
Ongoing government shutdowns have limited the Fed’s access to official economic data, complicating decision-making.
Policymakers are relying on private sector reports and anecdotal evidence to assess the labor market and inflation trends.
U.S. stocks turned negative during Powell’s remarks, with the S&P 500 dipping after hitting an intraday high. Treasury yields rose as traders recalibrated expectations for future rate moves.
