A growing sense of uncertainty is gripping the Federal Reserve as deepening divisions among policymakers cloud the outlook for interest rates heading into the crucial December meeting. The minutes from the Federal Open Market Committee’s October session reveal that while several participants felt inflation was near the Fed’s target—setting aside tariff effects—many noted that price growth has persistently overshot the central bank’s goal without “sustainably” returning toward the two percent mark anytime soon, according to the official record.
The semantics of Fed communication matter, and as BMO Economics Senior Economist Priscilla Thiagamoorthy explained in a note, “several’ is greater than ‘many,’ meaning those who thought a December rate cut could be appropriate were still in the majority.” However, Thiagamoorthy pointed out that since the October meeting, hawkish voices have grown louder while the likelihood of a December rate cut has plunged, with markets now nearly pricing out the possibility.
The market’s shifting consensus is closely tracked by CME Group’s FedWatch tool, which translates futures prices into probabilities of rate changes. As of today, the odds are two-to-one that the Fed will keep rates steady at its December 9-10 meeting. Just eight days earlier, FedWatch showed a 67 percent chance of a rate cut and a 33 percent chance of no move.
Discord within the committee is increasingly visible. At the October meeting, two voting members took the rare step of dissenting: Governor Stephan Miran—appointed by President Trump—pushed for a deeper, 50-basis-point cut, while Kansas City Fed President Jeffrey Schmid, a Biden appointee, favored leaving rates unchanged. Not since August have two members objected to a rate decision, and those instances mark the first such dual dissent in three decades—a sign of rising friction at the central bank, which some observers say could undermine market confidence. As the report notes, even the theoretical benefits of broader debate may be outweighed if markets respond to perceived Fed disarray.
Two major sources of uncertainty are fueling the debate. The first is the unusual conflict between the Fed’s dual mandate. With a weakening labor market and inflation on the rise, policymakers face demands for opposite monetary responses. Slower job growth typically signals rate cuts to spur business and hiring, while elevated inflation would require tighter policy to tame rising prices.
The second factor is more procedural but equally troubling. The federal government shutdown stripped the Fed of critical economic data, including the Bureau of Labor Statistics’ September Job Openings report and the October Employment Situation release. The loss of these reports, as noted by the Bureau itself, has left central bankers and markets alike “without their compass,” complicating every big-picture decision.
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