Federal Reserve Grapples with Interest Rate Decision Amid Economic Uncertainty
According to the Economic Desk of Webangah News Agency, the Federal Reserve considered a second interest rate cut in October due to a sudden downturn in the U.S. labor market. However, some officials have since expressed concerns, casting doubt on support for a potential third rate cut in December.
The lack of recent economic data, caused by the U.S. government shutdown in October and November, has heightened this divergence. The most recent inflation figures, released on December 5th, pertained to September and are unlikely to significantly alter monetary policy discussions.
Investors briefly showed skepticism about another rate cut in mid-November, but their views shifted after New York Federal Reserve President John Williams suggested he anticipated a short-term rate cut on November 21. The market responded, now pricing in over a 90% probability of a rate cut at the December meeting.
Economists surveyed by Bloomberg predict the Federal Reserve will hold steady before implementing two more cuts in 2026, hoping that a surge of new data—as statistical agencies catch up from the government shutdown—will ease the ongoing tension between the Federal Reserve’s dual mandate of controlling inflation and maximizing employment.
Further controversies loom within the Federal Reserve. President Donald Trump is expected to soon nominate a replacement for Jerome Powell. Kevin Hasset, a staunch Trump loyalist and top economic advisor, is considered a leading candidate. This has sparked concerns among some investors that the next chair might pursue interest rate cuts at Trump’s behest, potentially risking higher inflation.
Bloomberg reports that, unlike the Federal Reserve, the Bank of Canada is expected to hold its interest rate steady at 2.25%. Officials have stated that this rate is approximately appropriate until economic and inflationary forecasts materialize.
