Why hopes of a December Fed rate cut are declining

Core Viewpoint - The likelihood of a rate cut by the Federal Reserve in December is diminishing as more officials express caution about further cuts, with current inflation levels being a significant concern [1][2]. Group 1: Fed Officials' Perspectives - Kansas City Fed President Jeff Schmid believes inflation is too high and suggests that a rate cut may not help the job market due to structural long-term issues [2][3]. - Schmid's dissent at the last policy meeting reflects a growing divide within the Fed, with more officials leaning towards holding rates steady rather than cutting [3][4]. - The current sentiment among Fed officials indicates a potential for dissent on either side, depending on the decision made regarding rates [5]. Group 2: Market Expectations - Traders' expectations for a December rate cut have decreased significantly, with the odds now at approximately 45%, down from 94% a month ago [5][6]. - Fed Chair Powell has indicated that a rate cut in December is not guaranteed, further influencing market perceptions [6]. Group 3: Future Fed Composition - Atlanta Fed President Rafael Bostik's upcoming retirement in February presents an opportunity for the president to reshape the Fed, although the Atlanta Fed does not have a vote on the FOMC until 2027 [7][9]. - The potential nomination of a new Fed chair by the president in May could lead to a more dovish stance within the committee, impacting future monetary policy [10]. - The Supreme Court ruling in January regarding the president's authority to fire a Fed member could also influence the Fed's direction [11].