After cutting rates twice this fall, and by 1.5 percentage points in the past 15 months, any further cuts bring the Fed’s benchmark closer to the point where it would stimulate economic activity — something many officials are trying to avoid. Several officials believe they are already at a neutral level, which neither stimulates nor limits growth. The conflicting views on how restrictive the Fed really is will likely fuel another divided decision, with some analysts betting on as many as three dissents. Powell’s task of building a consensus will only prove more difficult in the absence of new economic data — the ripple effects of a government shutdown that lasted all of October and much of November. Official labor market figures for November will not be released until December 16, followed by inflation data two days later.
“It leaves the Fed in this position where it has to walk a fine line,” said Diane Swonk, chief economist at KPMG.
Powell cannot guarantee what the committee’s next move will be when he faces reporters after the meeting, Swonk added. “He has to represent the spectrum of views, going from one extreme to the other, and that’s just a much more difficult message to convey.”
The central bank’s interest rate decision will be announced in Washington on Wednesday at 2 p.m., along with a committee statement and a new set of economic projections. Powell will hold a news conference 30 minutes later.
Statement after the meeting
The number of announced layoffs fell in November, although some of the largest U.S. companies, such as Amazon.com Inc. and Verizon Communications Inc., made news with plans to cut staff. Consumer spending was little changed in September, while the Fed’s preferred inflation measure rose to 2.8%, almost a full percentage point above the central bank’s target.In that context, most analysts expect policymakers to reiterate that downside risks to employment have “increased in recent months” and that “inflation remains somewhat elevated.” Some also expect the statement to signal less certainty about the likelihood of additional rate adjustments in the coming months.
“My feeling is that they’re going to pause because they’re waiting for more data now because they’ve already made some rate cuts in the system,” Swonk said.
A new set of economic projections is likely to show continued division among policymakers. In September, eight officials were already in favor of cutting rates no further in 2026 than where they will be after a cut this week, while nine officials expected at least two more cuts.
Economists also expect the committee’s average estimate for 2025 growth could be revised upwards, while the inflation outlook for the end of this year may be revised slightly. Unemployment for next year is expected to be higher than forecast in September.
Differences
Powell, who has not spoken publicly since the central bank’s interest rate decision in October, is likely to face an even more fragmented committee. A number of regional presidents, many of whom did not have a vote on monetary policy this year, have publicly rejected further rate cuts. Others have expressed hesitation or concern about what further adjustments could mean for the economy if inflation continues to run above target.
However, on November 21, New York Fed President John Williams, who is seen as close to Powell, addressed investors’ doubts about a rate cut at this week’s meeting. He said there is room for another cut in the “near term,” increasing market chances for a cut.
Many analysts believe that Jeff Schmid, president of the Kansas City Fed, and Alberto Musalem, president of the St. Louis Fed, will differ in favor of keeping rates stable. Others — including Susan Collins of Boston, Austan Goolsbee of Chicago and Fed Governor Michael Barr — have all expressed concerns about inflation since the last meeting. Fed Governor Stephen Miran is expected to dissent in favor of a larger half-point cut, as he did in the last two meetings.
Investors are also closely watching the White House for any announcements about President Donald Trump’s choice to succeed Powell when his term as chairman ends in May. Kevin Hassett, director of Trump’s National Economic Council, is seen as the front-runner, although a formal nomination may not come until early next year.
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