Divisions are deepening among Federal Reserve policymakers regarding sufficient data for a potential interest rate cut next month, narrowing Chair Jerome Powell’s path forward. According to Evercore ISI strategist Krishna Guha, Powell faces difficult choices amid these disagreements. Federal Reserve Bank of Boston president Susan Collins expressed her preference to maintain current policy rates for an extended period, citing the need to balance inflation and employment risks in a volatile environment.
Guha noted that Collins’ opposition to a December rate cut increases concerns about Powell’s ability to manage divisions within the Federal Open Market Committee, creating further uncertainty about future rate adjustments. The potential delay or partial release of the October jobs report due to the federal government shutdown also complicates the rate outlook.
“These developments chip away at our confidence the Fed will cut in December without giving us any more confidence a skip to Jan is a better bet,” Guha stated. He maintains a view that a December cut is still more likely but with reduced confidence, estimating the probability at 55 per cent to 60 per cent.
The probability of a quarter-point rate cut next month declined on Thursday morning in New York, falling to 53.6 per cent from 62.9 per cent the previous day and 95.5 per cent a month prior, as indicated by 30-day fed funds futures prices.
