The US Federal Reserve remains undecided about an additional rate cut in December — with Jerome Powell recently citing internal policy divides and lack of federal government data as key hurdles. The central bank had voted 10-2 to lower the benchmark federal funds rate by 25 basis points last week to temper additional weakening of the job market. Policymakers now warn that elevated risks to both its employment and inflation mandates have overshadowed the possibility of anothe rate cut by December 10.
“We’re going to collect every scrap of data we can find, evaluate it and think carefully about it. And that’s our job. If you asked me could it affect … the December meeting, I’m not saying it’s going to, but yeah, you could imagine that. You know, what do you do if you’re driving in the fog? You slow down,” Powell had said last week.
Fed Governor Lisa Cook also admitted on Monday that the current scenario was “live” for a possible rate cut but not a lock. Multiple key members have highlighted the ongoing policy tug-of-war in recent comments — with some batting vehemently for multiple steep cuts and others adopting a dovish approach.
‘Dual mandate is in tension’ – Fed Governor Cook
“Keeping rates too high increases the likelihood that the labor market will deteriorate sharply,” though for now the labor market is “still solid,” Cook said in her first public remarks since President Donald Trump launched a so-far unsuccessful attempt to oust her. On the other hand, Cook said, “lowering rates too much would increase the likelihood that inflation expectations will become unanchored,” though at this juncture “it is encouraging that most long-run inflation expectations … are low and stable.”
“The dual mandate is in tension … so I’m attentive to both sets of risks,” she added.
San Francisco Fed chief Mary Daly also offered a similar perspective — calling the recent cut further “insurance” against labor market weakening and keeping an “open mind” about the need for a similar move in December.
“It would be an unfortunate outcome, one that we would absolutely want to avoid, if we get inflation to 2% at the cost of millions of jobs,” she said.
At the same time, she said, inflation remains too high and the Fed must make a decision that “balances those risks.”
