December interest rate cut in doubt as Fed minutes show policymakers divided

Core Insights - The Federal Reserve's policy meeting minutes indicate uncertainty regarding interest rate cuts in December and early next year, with policymakers divided on the necessity of an additional rate cut due to concerns over the labor market and inflation [1][2][5] Interest Rate Decisions - The Fed implemented its first rate cut of the year in September, followed by a second 25-basis-point cut in October, resulting in a benchmark federal funds rate range of 3.75% to 4% [2] - Participants expressed differing opinions on the appropriateness of further rate cuts at the December meeting, with some suggesting that a 25-basis-point reduction may not be likely [5][6] Inflation and Tariff Impact - The minutes highlighted discussions on the impact of higher tariffs from the Trump administration, which have increased costs for businesses importing goods and contributed to rising inflation as these costs are passed to consumers [8] - While some policymakers noted that inflation was close to the Fed's long-term target of 2%, many remarked that overall inflation had been above target for an extended period without signs of returning to the 2% objective [9][11] Economic Outlook and Consumer Sentiment - Many participants anticipated a potential increase in core goods inflation in the coming quarters due to the pass-through effects of tariffs, although there was uncertainty regarding the timing and extent of these price adjustments [11] - The consensus among Fed policymakers was that monetary policy decisions would not follow a preset course but would depend on incoming data and the evolving economic outlook [12] Market Expectations - Market expectations for a third consecutive rate cut in December have fluctuated, with the CME FedWatch tool indicating a 43.8% probability of a 25-basis-point cut, a rise from 30.1% but below the previous week's 50.1% and last month's 98.8% [13]