THE members of the Fed they divide on new ones rate cutswhile uncertainty prevails regarding the trend of economic variables in the coming months. This is what emerged from the FOMC Minutesthe minutes of the Federal Reserve’s latest monetary policy meeting. In the last meeting held on 6-7 November, the monetary policy committee had decided to cut the cost of money by 25 basis points, bringing the rate fluctuation range between 4.50% and 4.75%. What are the reasons that led the FOMC to cut rates? And what to expect for the December meeting and upcoming meetings in 2025
FOMC convinced by the persistence of uncertainties
The decision to cut rates in November was motivated by containment of inflation growth and from a deterioration of labor market conditionswhich suggested a slowdown in the U.S. economy.
Powell had spoken of “uncertain economic prospects” and the permanence of risks on both the inflationary and employment fronts e he had given no indications clear on other possible ones rate cuts at the December meeting, reiterating a line linked to the outgoing data.
Since then, a slew of positive economic data, including a September inflation report and good October retail sales, have deflated expectations of further cuts.
What the minutes said
THE verbal of the last meeting, they actually suggested that i American bankers are divided on the timing of cuts and the neutral rate and for this reason they prefer a gradual and data-dependent approach. If the data indicated inflation moving sustainably towards 2% and an economy close to maximum employment – it hangs from the Minutes – it would be “It is appropriate to gradually move towards a more neutral monetary lineover time.”
Bankers agreed that “the unemployment rate has risen, but remains low”, while “inflation has made progress towards the 2% target, but remains somewhat high”.
The uncertainty, so, again prevails and some Fed members have said they favor accelerated rate cuts if the job market or economic growth deteriorates faster than expected, while other members have floated the possibility of a pause if inflation were to remain high.
The Trump unknown
Among the dynamics of inflation and employment there is now also the Trump unknown. The threats of imposition of new duties, materialized yesterday with an announcement on social media by the President-elect, and the start of a ultra-expansion and deficit economic policy, they risk reigniting inflation growth in the medium term, also influencing the Fed, which would be forced to interrupt rate cuts and reverse the trend.
What to expect in December
If last month there was a high probability of a cut in December, the signs of economic strength and concerns that Trump could fuel inflation had made the picture more uncertain. However, today it seems to prevail again the hypothesis of a cut to the next meeting of December 18, which would bring the change in the year to 75 basis points.
Sui futures FedWatch at the moment they indicate one 66.5% chance of a 25 point cut in December, compared to a 33.5% probability of nothing happening. Expectations of a reduction have progressively strengthened over the last week.
