Fed split on interest rates: Will the stock market see a cut?

Fed officials clash over December rate cuts amid inflation and job concerns

A split is emerging among US Federal Reserve officials over interest rates ahead of December’s policy meeting. Some policymakers are pushing for a quarter-point cut in the stock market today, while others argue for holding rates steady. The debate highlights differing priorities on inflation and jobs across the central bank.

San Francisco Fed President Mary Daly has called for a stock market rate reduction in December. She warned that the labour market faces risks of a sharper-than-expected slowdown, which she described as harder to correct than an inflation spike. Daly also believes softer tariff-related costs have lowered the chance of inflation rebounding.

She remains optimistic that the Fed’s 2% inflation target can be met without a rise in unemployment. However, Daly is not a voting member of the Federal Open Market Committee this year, limiting her direct influence on the decision.

Meanwhile, Fed Governor Christopher Waller has repeatedly backed a quarter-point cut at the December meeting. His stance contrasts with Boston Fed President Susan Collins, who suggested keeping rates unchanged for now. Collins pointed to inflation still running above target and signs of cooling in the labour market.

The divide reflects broader tensions within the Fed. Some officials prioritise inflation risks, while others focus more on protecting jobs. No records show any Fed member advocating for a quarter-point cut as far back as July 2022.

The December meeting will reveal whether the Fed adjusts rates or maintains its current stance. A cut could ease pressure on the labour market, while holding rates may keep inflation in check. The decision will depend on how policymakers weigh these competing concerns.