Federal Reserve officials have recently expressed a cautious stance regarding the interest rate decision in December. Although inflation is moving towards the 2% target, most officials have not explicitly supported or opposed a rate cut in two weeks in their public statements. This attitude reflects uncertainty about the current economic outlook, especially following Trump's election, as his promises on trade policy, tax cuts, and immigration could impact the economic trend in the coming months.
San Francisco Fed President Daly stated, “We must continue to recalibrate policy, which is an issue we have the opportunity to discuss at the next meeting. I think we need to keep an open mind here.” Similarly, Chicago Fed President Goolsbee also remained cautious about the December meeting's outcome, emphasizing that the Fed's future policies will be adjusted according to the evolving economic situation.
Other Fed policymakers have echoed similar sentiments this week. Although they generally believe the Fed will continue to cut rates next year, they have not committed to a December cut. Fed Governor Kugler noted in a Tuesday speech that, while significant progress has been made towards full employment and price stability, the Fed still needs to closely monitor upcoming data to make informed decisions.
This Friday, the U.S. non-farm employment market report will be released, followed by the November CPI data next Wednesday. These data points will provide important bases for the Fed's decisions. The market expects a 25 basis point rate cut at the Fed's December 17-18 meeting, bringing the policy rate down to a range of 4.25%-4.50%. Two further cuts are expected before the end of 2025, slowing down from the Fed officials' predictions in September.
The only Fed official clearly supporting a rate cut is Waller, who favors continuing the cuts this month. Fed Chair Powell will speak at 2:45 AM Beijing Time on Thursday, marking his last public statement before the December policy meeting. Investors and markets will closely watch Powell's remarks for more clues on future policy directions.
Overall, financial markets anticipate that the Fed's pace of rate cuts may slow down in the future, especially considering potential policy changes from the Trump administration and the upcoming economic data releases.
