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荣获2019年City of London Wealth Management Awards
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荣获World Finance Forex Awards 2023最佳外汇客户服务奖
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荣获2023年City of London Wealth Management Awards
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荣获Global Forex Awards 2022 — 零售外汇颁赠
2021年迪拜外汇博览会获颁赠
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荣获2021年City of London Wealth Management Awards
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荣获Global Business Awards 2020
荣获2020年City of London Wealth Management Awards
Capital Finance International Magazine (CFI.co)颁赠
Capital Finance International Magazine (CFI.co)颁赠
荣获2019年City of London Wealth Management Awards
Shares Magazine 授予 UK Forex Awards 2018
Capital Finance International Magazine (CFI.co)颁赠
Capital Finance International Magazine (CFI.co)颁赠
2017年伦敦财富管理奖
2016最佳本土客户服务
中东和北非地区（MENA）增长最快的经纪商
2015年最佳外汇科技提供商
2014年最佳外汇科技提供商
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World Finance 2021颁发
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Global Forex Awards 2021 — B2B 颁赠
Global Forex Awards颁赠
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荣获Global Business Awards 2020
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World Finance Magazine 颁赠
World Finance Forex Awards 2020
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Global Forex Awards颁赠
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World Finance Magazine 颁赠
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荣获 World Finance Forex Awards 2018 颁赠
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Global Brands Magazine 颁赠
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To cut interest rates or not? The Federal Reserve is in its worst internal schism in 32 years!

Wonderful introduction:

Out of the thorns, in front of you is a broad road covered with flowers; when you climb to the top of the mountain, you will see the green mountains at your feet. In this world, if one star falls, it cannot dim the starry sky; if one flower withers, it cannot make the entire spring barren.

Hello everyone, today XM Forex will bring you "[XM Forex Official Website]: Cut interest rates or not? The Federal Reserve is in the most serious internal split in 32 years!". Hope this helps you! The original content is as follows:

The Fed's interest rate cut, which was once considered a certainty by the market next month, has now turned into a game of even odds as officials fiercely disagree on the health of the economy's fundamentals and whether stubborn inflation or weak hiring are the main risks. This article describes the current positions and views of various Fed members in the market, and excerpts from institutional views.

Two camps: sticky inflation vs. weak employment

In multiple public speeches over the past week, some policymakers' concerns about sticky inflation have significantly escalated - echoing the "affordability" anxiety that became a core issue in the election earlier this month.

At the same time, the other camp is more focused on the weakness of the recruitment market and the risk that the "low hiring, low firing" employment pattern may deteriorate into this round of layoffs.

The internal divisions in the Federal Reserve’s 19-member interest rate decision-making xmtraders.committee essentially reflect the deep fog of economic prospects caused by the intersection of multiple variables such as tariff barriers, artificial intelligence revolution, immigration policy adjustments, and tax system changes.

M&T Bank Chief Economist Luke Tilley pointed out, "There is a huge amount of uncertainty behind this, and it is xmtraders.completely reasonable to have such disparate opinions."

Risk of stranded interest rate cuts: High credit costs exacerbating people's livelihood anxiety

If the Fed scales back the scale of interest rate cuts, housing and auto credit costs will remain high.

Poll data shows that high mortgage and car loan interest rates are continuing to fuel widespread public dissatisfaction with the high cost of living.

Meeting Preview: A rare objection to the FMOC vote may become a high probability event

Many Fed observers warned thatRegardless of whether a rate cut is ultimately decided at the December 9-10 meeting, there is likely to be an unusually large amount of opposition.

EvercoreISI analyst Krishna Guha estimates that if a decision is made to cut interest rates, there may be as many as four to five votes against it; if the interest rate is kept unchanged, there may be three votes against it.

Judging from the Fed's history of seeking policy consensus, four dissenting votes will constitute an extremely rare situation - the last time four officials collectively opposed it was in 1992 when Alan Greenspan was chairman.

Federal Reserve Governor Christopher Waller admitted on Monday that the Fed is often criticized for having "groupthink" because most of its decisions are made by unanimous vote.

"Those who accuse us of engaging in groupthink, be prepared," Waller said in a speech in London on Monday. "You are about to witness the least groupthink in the Fed in a long time..." suggesting that Fed officials will no longer deliberately pursue "surface consensus", but will publicly express support or opposition based on their own judgment of the economy (which is more important, inflation vs. employment).

Data outage: Government shutdown magnifies decision-making dilemma

The government shutdown has led to interruptions in the release of economic data, further amplifying this disagreement - posing a special challenge to the "data-dependent" Fed that Chairman Powell has repeatedly emphasized.

The latest employment data released by the government is currently in August, while the inflation data is only updated to September.

September non-farm employment data will be officially released on Thursday. The market expects 50,000 new jobs to be created that month and the unemployment rate to remain at a low level of 4.3%.

Reversal of market expectations: Halving the probability of an interest rate cut triggers a stock market correction

Data from the CME Group's Federal Reserve Watch Tool (CMEFedwatch) shows that Wall Street investors' pricing probability of an interest rate cut in December has dropped to around 50%, a sharp drop from the peak of nearly 94% a month ago - this expected reversal is one of the core drivers of this week's stock market correction.

The current probability of an interest rate cut has risen slightly from 42.36% to 48.9%.

Policy turning signal: After Powell cooled down, the official camp divided

After the Federal Reserve xmtraders.completed its first interest rate cut this year in September, policymakers issued a signal that two more interest rate cuts are expected to be implemented in October and December.

However, after xmtraders.completing the second interest rate cut on October 29, Powell poured cold water on the prospect of subsequent interest rate cuts, making it clear that a December interest rate cut is "not an established fact - far from it."

Speeches by several regional Fed officials last week further dampened expectations for rate cuts. Susan Collins, president of the Federal Reserve Bank of Boston, said: "In all xmtraders.communications with businesses and people in New England, high prices have always been a core concern."

Collins emphasized that maintaining the Fed's benchmark interest rate at the current level of around 3.9% will help push inflation back to its target. She added that even at current interest ratesHowever, the U.S. economy "remains quite resilient".

Raphael Bostic of the Atlanta Fed, Alberto Mussallem of the St. Louis Fed, Jeffrey Schmid of the Kansas City Fed and many other regional Fed presidents also expressed similar positions.

Mussallem, Collins and Schmid are all 12 officials with voting rights on policy this year. Schmid voted against it at the October meeting and advocated keeping interest rates unchanged.

Schmidt said on Friday, "When xmtraders.communicating with business leaders in the area, I continue to hear concerns about the speed of price increases. Of course, this includes the impact of tariffs on input costs, but it is by no means limited to that - it is not even mainly about tariffs. Rising medical costs, insurance premiums, and soaring electricity bills are all pain points that the public has expressed strongly."

He pointed out that "the job market is still weak and almost stagnant, and September inflation data continues to show that the transmission effect of tariffs is relatively limited, which confirms the assumption that tariffs... are not a sustained driver of inflation."

Waller refuted the view put forward by Schmid and others that "inflation has been above the 2% target for five consecutive years, and high interest rates should be maintained." He emphasized that there are currently no signs that the public has formed expectations that inflation will remain high for a long time. He added, "You cannot simply refuse to cut interest rates on the grounds that 'inflation has exceeded the standard for five years.' Opposing interest rate cuts must provide more convincing arguments."

Consensus breakthrough: employment data becomes a key variable

Former Kansas City Fed President Esther George analyzed that if new economic data in October and November show a net loss of jobs, a consensus within the Federal Reserve may be formed to cut interest rates.

It is worth noting that although the market had expected multiple dissenting votes at the September meeting, in the end only Stephen Millan, the governor appointed by President Trump that month, voted against and advocated a larger interest rate cut.

"Voting against is a difficult decision. I think some officials who have publicly expressed their opposition today may not necessarily stick to their position in the final vote," George said. "No matter where the final policy goes, the Fed will reach a sufficient basis for consensus."

Political pressure may affect the Fed's decision-making

Trump publicly stated on Tuesday that he was discussing with a number of "unexpected candidates" to succeed Fed Chairman Powell. Powell's term will officially end in May 2026, which means that the Fed's policy direction may undergo a 180-degree turn in the next six months, and the market's concerns about the "Trump 2.0 Monetary Era" instantly exploded!

U.S. Treasury Secretary Bessent said that Trump will meet with the three candidates for chairman of the Federal Reserve after Thanksgiving. "It's safe to say I'm not going to be the Fed chairman."

Institutional view:

After the U.S. government restarts, CitigroupWeak labor market data will prompt the Federal Reserve to initiate interest rate cuts at the Federal Open Market xmtraders.committee (FOMC) meeting in December. Interest rate cuts are also a core variable affecting the current stock market.

Despite the recent retracement of the stock market, the expectation of an interest rate cut by the Federal Reserve xmtraders.combined with the marginal improvement in market liquidity after the government shutdown has created a favorable environment for U.S. stocks - this xmtraders.combination is expected to reactivate the U.S. equity market and lead to a "Christmas market" in the United States at the end of the year.

Key indicators that need to be tracked include the upcoming labor market data (non-farm employment data, job vacancies and labor turnover survey/JOLTS) and inflation reports. Such data will be decisive for the direction of the Federal Reserve’s policy decision in December and even whether the “Christmas rally” at the end of the year can be realized.

The U.S. dollar index has begun to correct recently, while gold prices have rebounded. The market seems to have reflected the reduced probability of the Federal Reserve cutting interest rates in December.

DirkWiller, global head of macro strategy and asset allocation, and Alex Saunders, global head of quantitative macro strategy, put forward two bases, saying that it is too early to hold on to the pessimistic expectations of abandoning the Christmas market.

Based on the first, the government shutdown has ended and economic data will return to the normal release rhythm. Based on this, we predict that the Federal Reserve will implement an interest rate cut in December; the second is that market liquidity will show marginal improvement.

At the same time, the U.S. dollar index has begun to correct recently, and gold prices have rebounded. The market seems to have reflected the reduced probability of the Federal Reserve cutting interest rates in December.

Summary:

There are many things to watch at this December interest rate meeting in the United States. From previous articles, we can know that the U.S. job market is indeed facing an increase in layoffs, a reduction in jobs, and no significant increase in job salaries, all pointing to a shrinking job market.

Obviously, the Federal Reserve will make decisions based on data, but the public data are the same. Some people still voted against the interest rate meeting in October. It is also a data black hole. In October, the Federal Reserve still decided to cut interest rates by 25bp. At the same time, the credibility of U.S. data has also put a question mark on the market through several significant revisions of data this year.

In addition, the U.S. government’s multiple strong interventions in the Federal Reserve, including the replacement of xmtraders.committee members, have also increased uncertainty.

Affected by the changes in the probability of interest rate cuts, equity markets around the world have undergone relatively large corrections, and gold prices have only begun to strengthen since Tuesday. These trends represent early bets by smart funds.

Whether the Federal Reserve will cut interest rates in December will ultimately be a xmtraders.competition to grasp the data or a random show with a predetermined outcome. The trading portal will wait and see.

The above content is all about "[XM Foreign Exchange Official Website]: To cut interest rates or not? The Federal Reserve has fallen into the most serious internal division in 32 years!" It was carefully xmtraders.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!

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