The Federal Open Market Committee (FOMC) plans to deliberate on interest rates at its meeting on December 9-10. Financial markets expect a 0.25 percentage point cut to the current target range for the federal funds rate, between 3.75% and 4%.
Market expectations for a December rate cut by the Federal Reserve have also risen sharply, with the probability of a December rate cut currently around 87%, according to CME FedWatch data.
Morgan Stanley The agency has revised its forecast, anticipating a 25-basis-point rate cut by the Federal Reserve following its policy meeting on December 9-10. This was a change from the agency's earlier prediction of a rate cut, which was based on a strong September U.S. jobs report, and a forecast that the cut would be delayed until 2026.
Federal Reserve Governor Stephen Miran stated in a television interview last Tuesday that the Fed's excessively high interest rate target has led to a deterioration in the job market. He suggested further interest rate cuts to support the economy. Meanwhile, significant internal divisions remain within the Fed regarding whether to cut rates.
Although Milan has repeatedly insisted on its stance of drastically cutting interest rates to save the economy, there remains a significant division within the Federal Reserve regarding whether to cut rates. The latest September employment data shows that job growth exceeded expectations, and the unemployment rate rose slightly to 4.4% from 4.3% in August.
In addition to Milan, New York Federal Reserve President John Williams The data release also sent a dovish signal. He stated that with the labor market cooling, the Federal Reserve still has room for further rate cuts in the near term to adjust its policy stance to a level closer to neutral.
Williams stated, "There is room for further adjustments in the near term... to bring the policy stance closer to the neutral range." He emphasized that while restoring inflation to the 2% target, "it is equally important to avoid undue risks to the labor market." Williams ' wording, especially the phrase "in the near term," was interpreted by the market as a clear signal that supporting rate cuts is the path of least resistance.
San Francisco Fed President Mary Daly was even more direct in an interview. She expressed support for a December rate cut because she believes a sudden deterioration in the labor market is a "more likely and more difficult-to-manage" risk than a resurgence of inflation. Daly believes the Fed is capable of handling rising cost pressures, but regarding the labor market, "if layoffs start to increase slightly, they could increase significantly," at which point the Fed will find it difficult to "stay ahead."
The concerns of hawkish officials cannot be ignored. Following the second rate cut in October, four voting Fed officials have expressed concern about further rate cuts. They believe that upward price pressures are spreading from tariff-affected goods to domestic services, indicating that the inflation base is widening.
They worry that if the Federal Reserve lowers interest rates too quickly to a neutral level while inflation is still out of control, it could weaken necessary policy restraint. A prime example is the shift in attitude of Boston Fed President Susan Collins, who, while voting for an October rate cut, said last Saturday she was “hesitant” about further cuts, believing that the current “moderately restraining” interest rate level may be necessary to control inflation.
(Source: Securities Times) (Times)
