Fed Split Revealed in October Rate-Cut Minutes, Markets Shift
- Fed members show strong disagreement about further rate action at the coming meeting.
- Markets shift swiftly after Powell signals that no December move can be assured.
- Traders now watch policy signals closely as missing data fuels deeper uncertainty.
Federal Reserve officials cut interest rates last month, although they sharply disagreed on the decision, according to minutes from the meeting held on October 28–29. The meeting showed growing caution over inflation risks, doubts about a December rate move, and broad concern about the limited data available during the 44-day government shutdown.
Deep Divisions Over the October Rate Decision
Many officials supported lowering the federal funds rate. Some within this group said they could also accept holding rates steady. Several others opposed the cut, saying that progress toward the 2% inflation goal stalled.
Their comments pointed to concern about longer-term inflation expectations. They said those expectations could rise if inflation stayed above the 2% target for too long. The minutes also noted that most participants said further reductions could raise the risk of entrenched inflation or suggest weak commitment to the 2% goal.
Participants also expressed sharply different views about December. This matched Chair Jerome Powell’s warning that a December cut was not a “foregone conclusion.” He said this during his post-meeting press conference. Before those comments, traders expected another cut at near-certainty levels.
CNBC reported that futures markets priced a one-in-three chance for a December cut by Wednesday afternoon. CME Group’s FedWatch tool showed odds for a January cut near 66%. This shift came quickly after Powell’s remarks and the release of the minutes.
Uncertain Outlook Ahead of Key Data Releases
The Bureau of Labor Statistics announced a revised release schedule on Wednesday. Due to the shutdown, the Fed will not receive updated job numbers for October or November before the December meeting. The delayed September report is set for release on Thursday.
Analysts said the missing reports removed key inputs normally used in policy debates. Oliver Allen of Pantheon Macroeconomics said the FOMC appeared “far more divided than usual.” He wrote that the release schedule change added further caution.
Stocks reduced earlier gains after the minutes reached the markets. Treasury yields remained higher through the session. This reflected steady concern about the near-term policy path and inflation-related uncertainty. Shortly before the minutes came out, President Donald Trump repeated his criticism of Powell. He said he would “love to fire his ass” for not lowering rates faster.
Related: FOMC Retains Interest Rates, Inflation Still Top Concern
Shutdown Data Gaps and Balance Sheet Decisions Shape Policy
The minutes detailed how the 44-day shutdown complicated discussions. Key reports on inflation, labor, and other indicators were not available. Agencies such as the BLS and Bureau of Economic Analysis set new release schedules, though some dates remained unknown.
Powell described the situation as “driving in the fog.” Fed Governor Christopher Waller rejected that view on Monday. He said the Fed still had enough data for policy decisions.
The FOMC also agreed to halt the balance sheet reduction in December. The process removed more than $2.5 trillion in assets. The balance sheet stands at $6.6 trillion. Officials supported ending quantitative tightening, which included reductions in Treasury and mortgage-backed securities.
One pivotal question remains: How will policymakers navigate sharp divisions without full economic data before the December meeting?
