Disagreements within the Fed intensify! The expectation for a rate cut in December has completely changed, and the market's Bull vs Bear Battle has entered a heated stage.

At the end of the year, policy directions are once again in flux, with Fed officials fiercely debating the issue of interest rate cuts in December. The market's previous expectations for rate cuts have taken a sharp turn, with related probabilities falling significantly from high levels to below fifty percent. Coupled with key data supply disruptions, persistent inflation stickiness, and a hardline hawkish stance, this internal division is continuing to stir the global market landscape.
Hawkish voices intensify: Inflation remains unstable, and interest rate cuts are absolutely impossible.
Dallas Fed President Logan clearly stated: "As long as the downward trend of inflation is not clear, I will not support a rate cut in December"; Kansas City Fed President George immediately echoed, warning that "cutting rates at this time will further push up inflation, which is like adding fuel to the fire." Cleveland Fed President Mester, Boston Fed President Collins, and several other officials have continuously released hawkish signals. Even Atlanta Fed President Bostic, who previously leaned towards supporting a rate cut, suddenly changed his stance, emphasizing that "more data support is needed to advance a rate cut."
Data Vacuum Dilemma: Powell Faces Unprecedented Decision-Making Challenges
The key data gap caused by the U.S. government shutdown has put the Fed in a "no data to rely on" decision-making dilemma. The non-farm payrolls and core PCE data for September have been delayed, and the rescheduled data may have distortion risks due to interruptions in the statistical process. Powell openly admitted that the lack of data has increased the difficulty of policy formulation, while the Fed has already been divided internally: dovish board member Mylan advocates for a significant rate cut to stabilize the economy, while hawks firmly maintain a tightening stance without compromise. The December interest rate meeting has become the most suspenseful policy battle in recent years.
The market reacted violently: the US dollar rebounded, and interest rate cut expectations cooled significantly.
The interest rate futures market experienced an "overnight reversal," with the probability of a rate cut in December plummeting to 44.4%, while the probability of pausing rate cuts rose to 55.6%. The US dollar index took the opportunity to rebound strongly, maintaining the key level of 99.30 for two consecutive trading days. Wall Street institutions have also turned cautious, with firms like BlackRock and Goldman Sachs issuing warnings that if inflation remains high, not only will a rate cut in December be unlikely, but the chances of a rate cut in January next year will also significantly decrease. Some even suggest that the rate cut cycle may be delayed until 2026.