US Fed minutes show ‘many’ officials lean against December cut

Many Federal Reserve officials said it would likely be appropriate to keep interest rates steady for the remainder of 2025, according to minutes of the Federal Open Market Committee’s October 28-29 meeting.

The record of the meeting, released Wednesday in Washington, also showed “several” policymakers were against lowering the Fed’s benchmark rate at that gathering.

“Many participants suggested that, under their economic outlooks, it would likely be appropriate to keep the target range unchanged for the rest of the year,” the minutes said.

Still, “several participants” said another cut “could well be appropriate in December if the economy evolved about as they expected” before the next meeting.

In the specific hierarchy of so-called counting terms often used in the Fed minutes, “many” falls below “most/majority”, indicating that the “many” that leaned against another cut in December were still in the minority at the time of the October meeting.

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The minutes underscored the uncertainty around the likelihood of a cut next month, given ongoing divisions on the committee over whether inflation or unemployment represents a greater threat to the US economy.

A majority of the panel’s voters agreed at the meeting to lower interest rates by a quarter percentage point for a second straight time, though two officials dissented. Governor Stephen Miran, President Trump’s recent appointee, voted to cut rates by a half-point. Kansas City Fed President Jeff Schmid favoured holding rates steady.

During his press conference following the meeting, Fed Chair Jerome Powell surprised investors by cautioning that another cut in December was “not a foregone conclusion.”

In the three weeks that followed, Fed officials who are more worried about inflation and less inclined to lower rates again in December have dominated the public discussion over the path ahead for monetary policy.

On Wednesday, the government cancelled the publication of the October employment report because some data couldn’t be collected during the shutdown and scheduled the November data release on Dec. 16 — after the Federal Reserve’s final meeting of the year. Investors lowered their bets on a December interest-rate cut after the new data schedule was published.

In a discussion about financial stability risks in the October minutes, some officials commented on “stretched asset valuations in financial markets”.

Several of those policymakers pointed to “the possibility of a disorderly fall in equity prices, especially in the event of an abrupt reassessment of the possibilities of AI-related technology.”

Balance Sheet Debate

The minutes also showed that “almost all participants” thought it appropriate to halt the runoff of securities from the Fed’s balance sheet on Dec. 1, or could support that decision. Officials have been shrinking the balance sheet since mid-2022 and decided at the October meeting to end that process next month.

Some market participants have worried the Fed is waiting too long to stop the runoff, allowing liquidity pressures to create volatility in overnight funding rates.