Fed policymakers signal hesitation on December rate cut amid deepening divisions

A growing number of Federal Reserve policymakers are signaling reluctance to push ahead with further rate cuts this year, citing persistent inflation pressures and mixed labor-market data, Reuters reports. The shift comes as short-term futures now price in a less-than-50% chance of another reduction when the Federal Open Market Committee meets on 9-10 December — down from 67% earlier this week.

REMEMBER- The Fed has already delivered two 25 bps cuts this year in September and October, bringing the target range to 3.75-4.00% as Chair Jerome Powell attempts to steer between showing growth and inflation still running near 3%. Powell noted after the October cut that another move in December was “far from” assured, particularly given the delay in official data releases caused by the US government shutdown.

Their take: Fed President San Francisco Mary Daly said that it was “premature” to decide on another move four weeks ahead of the next policy meeting — marking a shift in stance from her vocal support of rate cuts earlier, while Boston Fed’s Susan Collins warned she sees a “relatively high bar” for additional easing absent “notable labor-market deterioration.” Minneapolis Fed’s Neel Kashkari said inflation remains “too high,” adding that while some parts of the US economy are performing well, “some sectors of the labor market look like they’re under pressure.”

The Fed is navigating incomplete macro incomplete data: Private-sector indicators show firms shedding roughly 11k jobs a week through late October, while inflation on about 55% of CPI components remains above 3%, Reuters added, citing Apollo’s partner and chief economist Torsten Slok. “This is the reason why it is difficult for the Fed to cut interest rates in December,”Slok said.

The Fed officials’ remarks also “raise concerns about Powell’s struggle to manage deep splits” among policymakers, Evercore ISI Vice Chairman Krishna Guha wrote in a note picked up by Reuters added.

The debate comes as the Fed’s internal independence faces renewed political strain as the routine reappointment of regional bank presidents could see President Donald Trump hold more sway over the central bank’s leadership and policy direction, Reuters reports.

The process has been thrust into the spotlight by Atlanta Fed President Raphael Bostic’s surprise retirement announcement earlier this week and Trump’s earlier attempt to dismiss Fed governor Lisa Cook — the first such presidential move in the institution’s history. The White House is also expected to name its own choice of Fed chair within months, as Powell’s term expires in May 2026.

MARKETS THIS MORNING-

Asian markets are tracking Wall Street losses, with tech stocks continuing to come under pressure. Japan’s benchmark Nikkei lost 1.9%, with Japanese SoftBank falling as much as 8% in early trading following news that it sold its stake in Nvidia, while South Korea’s Kospi fell 2.3%. Chinese equities were not spared, with Hong Kong’s Hang Seng losing 1.5% and China’s CSI 300 dipping 0.6% at the open.

Meanwhile, futures point to another day in the red for Wall Street stocks as they open little changed from yesterday’s losses.

THE CLOSING BELL-

The DFM fell 0.8% yesterday on turnover of AED 683.6 mn. The index is up 16.1% YTD.

In the green: Al Mal Capital REIT (+15%), Ekttitab Holding (+15%) and Ithmaar Holding (+10.4%).

In the red: Agility The Public Warehousing Company (-7.6%), Al Mazaya Holding Capital (-7.5%) and International Financial Advisors (-6.6%).

Over on the ADX, the index fell 0.3% on turnover of AED 1 bn. Meanwhile, Nasdaq Dubai was down 0.8%.