Fed Officials Weigh Inflation Concerns Before December Rate Decision
As the Federal Reserve prepares for its December meeting, officials remain cautious about cutting interest rates again amid mixed inflation signals and upcoming economic data releases.
Key Insights
- The Federal Reserve is gearing up for a crucial meeting to decide on potentially lowering interest rates for the third consecutive time.
- Governor Christopher Waller leans toward a rate cut, despite persistent inflation worries.
- San Francisco Fed President Mary Daly emphasizes the need to analyze upcoming economic data before making a decision.
Market expectations favor a rate reduction in December, but Fed officials remain divided on whether inflation progress justifies another cut. The Federal Open Market Committee (FOMC) has trimmed rates twice recently, yet recent inflation upticks and calls for caution complicate the outlook.
Governor Waller noted, “Although we’ve made significant progress over the past 18 months, recent inflation data suggests this momentum may be slowing. However, similar patterns last year eventually led to further declines, so we must avoid overreacting.”
September projections anticipated one more rate cut by year-end, with CME Group’s FedWatch indicating a 75% probability of a 0.25% reduction at the upcoming meeting.
Fed Officials’ Perspectives Ahead of the Meeting
Governor Waller supports a December cut, citing current economic data and forecasts pointing toward inflation trending back to the 2% target in the medium term.
Conversely, San Francisco Fed President Daly highlights uncertainty, stating that while rates remain elevated, more data is needed to confirm sufficient inflation progress to justify a rate cut.
“Maintaining economic stability requires ongoing policy adjustments, whether in December or later,” Daly said. “We must gather additional data to accurately forecast next year’s economic conditions—this is the essence of a data-driven Federal Reserve.”
Critical Data Influencing the Decision
Upcoming releases, including the November jobs report and the Consumer Price Index (CPI) data, are expected to play pivotal roles in shaping the Fed’s December policy direction.
New York Fed President John Williams emphasized, “Policy decisions will hinge on incoming data. The economic outlook remains highly uncertain, a lesson reinforced over the past five years.”
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