The Fed's situation ahead of the December interest rate decision
The Fed begins a 2-day meeting from now until just before the announcement (2 AM on 12/11). According to Nick Timiraos of the WSJ, up to half of the members may not support a rate cut.
However, the final decision still rests with Chairman Powell, who shows signs of leaning towards a cut despite facing an uncommon level of opposition:
- 5 out of 12 voting members have expressed that they do not see enough reason to lower rates.
- 10 out of 19 Fed officials are in a similar situation, whereas only 1 opposed it back in October.
The scenario seen as the most feasible for Powell to reduce the number of dissenting votes: the Fed cuts by 25 basis points while signaling hawkishly that conditions for further easing will be more difficult.
After the T9 employment report, the question posed to the Fed is whether the labor market is slowing due to weak hiring demand (supporting a rate cut), or due to a shrinking labor supply from reduced immigration (not yet needing a rate cut)?
