Fed's Policy Direction Shifts: Balancing Prudence and Swift Action in Crucial December Decision
- Fed faces 52% market odds of 25-basis-point rate cut at Dec 10 meeting, down sharply from 95% a month ago amid internal divisions. - Key officials like Collins and Kashkari oppose further easing without clearer labor market deterioration or inflation control below 3%. - Government shutdown delays critical data, forcing policymakers to rely on incomplete information and private-sector indicators. - Uncertainty risks asset markets: Bitcoin stagnates near $103k while real estate and growth stocks face headw
The Federal Reserve's decision on whether to cut rates in December has turned into a tense standoff, with market probabilities near 50% and growing disagreements among Fed officials. According to the CME FedWatch tool, financial markets currently assign
The Fed’s reluctance stems from a rising number of officials taking a more hawkish stance. Boston Fed President Susan Collins, who played a key role in the October rate cut, has changed her position, saying she would not support further easing unless there is “significant weakening in the labor market”
The implications go beyond just monetary policy. Delaying a rate cut could limit gains in riskier assets, especially cryptocurrencies.
With December drawing near, the Fed’s direction remains uncertain. As Krishna Guha of Evercore ISI noted, Collins’ open opposition raises doubts about Powell’s ability to keep the Federal Open Market Committee unified, especially after several split votes this year
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