Federal Reserve Chair Jerome Powell’s blunt message that investors should temper their hopes for another rate cut in December has laid bare the widening rift within the US central bank, where policymakers are increasingly split between those concerned about job losses and those still worried about inflation.

While Powell made clear that some colleagues are preoccupied with the slowing labour market, others warn that persistent price pressures will leave little room for further monetary easing. The situation has been made no easier by the ongoing government shutdown, which has frozen the release of official economic data and turned Fed meetings into exercises in guesswork.

The Fed’s Open Market Committee voted ten to two to trim the benchmark rate by a quarter point, to a range of 3.75 to 4 per cent, its second consecutive cut. But for the first time in six years, the decision wasn’t unanimous: one member wanted a deeper cut, another wanted none at all.

In straightforward language, Powell opened his post-meeting press conference by warning markets that another move in December was “by no means assured”. Later, in a tone that was equal parts professor and poker player, he added that “a growing number of voices now think it might be wiser to wait at least a cycle” before acting again.

Investors took the hint. Treasury prices tumbled the most in nearly five months after his remarks, pushing the ten-year yield back above 4 per cent. Fed funds futures, which only days earlier had priced in a near-certainty of another December cut, now suggest merely a “moderate probability”. I clearly didn’t expect this level of market reaction; this made it obvious they spent quite some time debating December”.

Back in September, the Fed had delivered its first rate cut of the year, citing a sharp slowdown in hiring that stirred anxiety about the labour market. However, the accompanying projections revealed the extent of the division among officials: nine of the nineteen policymakers anticipated no more than one additional cut this year, and seven wanted none at all through 2025. Last week’s vote marked the third straight meeting with visible dissent — something not seen since 2019 — underscoring the extent to which the Fed has become fractured.

The divisions have only deepened under the data blackout. Without official figures, policymakers have been forced to rely on patchy state-level and private-sector indicators to gauge employment trends. Powell, for his part, stressed that while companies like Amazon, General Motors, and Applied Materials have announced job cuts, overall layoffs remain low, a point he seemed keen to frame as reassurance. Yet he also made clear where he stood in the Fed’s internal tug-of-war. Downplaying inflation fears, he argued that the central bank still had a role to play in cushioning a labour market weakened, in part, by Donald Trump’s restrictive immigration policies.

“Some people say this is purely a supply issue that our tools can’t affect,” Powell said. “Others, including myself, believe there’s a demand component, and we should use our tools to support the labour market when we see this happening.” Such remarks will hardly delight the White House. A pause in December would all but guarantee another bout of Trumpian fury, as the president continues to lambast Powell for not cutting faster. His public attacks have already stoked concerns about the Fed’s independence, a concept that, under the current administration, feels increasingly nostalgic.

In short, Powell’s December warning may have been meant to calm markets. Still, it did something far more telling: it exposed a central bank at odds with itself, caught between political heat, economic fatigue, and a chair who insists he’s still in control, even as the walls close in.