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The Federal Reserve is making a big move!
On one side, there is a definite interest rate cut, and on the other, there are fierce internal disagreements.
Powell finds it very difficult to "navigate both sides" this time!
At this critical point on December 8, it’s almost certain that the Fed will cut rates this week, but what everyone is most concerned about is: will Powell hint at another cut in January? The Fed is now completely divided into two factions—hawks fear a rebound in inflation and firmly oppose arbitrary rate cuts; doves worry about the economy and employment, believing that further easing is necessary, and this disagreement is the largest seen in recent years.
Wall Street guesses this is a "hawkish rate cut": meaning Powell is first following the doves' suggestion to cut rates this week, but to appease the hawks, he will likely clearly state that "a cut in January is not guaranteed." Analysts at Bank of America say Powell is facing the most divided committee, and it may be like in October, where he cuts rates while saying some hawkish words to stabilize everyone; however, they also doubt if this tactic will work—after all, a lot of key economic data will be released between the two meetings, some of which have been delayed due to the previous government shutdown, creating too much uncertainty. Economists at JPMorgan also believe that Powell will emphasize that after this rate cut, interest rates will soon reach a neutral level of "neither stimulating nor suppressing the economy," and any further cuts will have to wait until the labor market really deteriorates; they cannot rely solely on predicting risks.
