When will the Federal Reserve cut interest rates next? That question has become much harder to answer as Fed officials find themselves deeply divided on what to do in December.
The Federal Open Market Committee is experiencing an unusual split. Seven out of 19 policymakers oppose any further rate cuts this year, while others believe the economy needs more help. It’s like a family dinner where half the relatives want pizza and the other half insist on salad – finding agreement isn’t easy.
This disagreement stems from competing concerns about jobs and inflation. Some Fed officials worry more about people losing work, while others focus on keeping prices stable.
The labor market shows troubling signs, with job searches taking longer and companies hiring fewer workers. Meanwhile, inflation remains stubbornly high in some areas, and new tariffs could push prices even higher.
Making decisions has become especially difficult because of a 29-day government shutdown that disrupted important economic data releases. The Fed is basically trying to navigate in the dark without their usual roadmap of employment and inflation statistics.
The Bureau of Labor Statistics might release three jobs reports before December’s meeting if the shutdown ends soon, but time is running short.
Fed Chair Powell made the uncertainty clear when he said a December rate cut is “not a foregone conclusion. In fact, far from it.” This unusually direct language caught markets off guard, since many investors had expected another cut.
The committee did announce one definitive change: they’re ending their program of reducing securities holdings, known as quantitative tightening. However, this doesn’t signal any shift toward cutting rates, as the two policies operate independently. The Fed’s balance sheet has shrunk by $2.5 trillion since June 2022 as part of this monetary tightening effort.
Markets had priced in multiple rate cuts through mid-2026, expecting rates to fall below 3%. But Powell’s emphasis on having “no set path” has increased uncertainty and market volatility. Similar to how the altcoin market experiences high volatility with uncertain futures, financial markets often struggle with unpredictable policy directions.
Wells Fargo expects three more cuts before 2026 ends, while Nuveen projects just two additional cuts totaling 50 basis points. Both predictions depend heavily on incoming economic data, which remains frustratingly scarce due to the ongoing data disruption. The Fed’s decision reflects its commitment to supporting maximum employment and maintaining price stability as its dual mandate requires.
