Many Federal Reserve officials judged that holding interest rates steady for the rest of 2025 would be the sensible, or at least the least regrettable, course of action, according to minutes of the Federal Open Market Committee’s 28–29 October meeting.
The record also revealed that “several” policymakers opposed cutting rates at all, a delicately phrased way of saying they would rather the Committee stop indulging markets’ addiction to cheap money.
“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, in that curiously ecclesiastical tone the Fed favours whenever stating the obvious.
Still, the minutes added, “several participants” argued that another cut “could well be appropriate in December if the economy evolved about as they expected”, which translates roughly as “if nothing goes wrong,” a condition that has not been met in US macroeconomic life for quite some time.
In the Fed’s own taxonomy of weasel words, “many” sits politely beneath “most” or “majority,” meaning the anti-cut crowd was still in the minority at the October meeting. Even so, the minutes made it clear that the Committee remains deeply split between those who fear inflation and those who fear unemployment, leaving investors to guess which monster the Fed currently finds more frightening.
A majority of voting members agreed to a second consecutive quarter-point cut, though two officials dissented. Governor Stephen Miran, President Trump’s shiny new appointee, voted for an even larger half-point cut. At the same time, Kansas City Fed President Jeff Schmid preferred to keep rates unchanged, a classic example of the Fed’s increasingly theatrical internal politics.
During his post-meeting press conference, Chair Jerome Powell startled markets by warning that a December cut was “not a foregone conclusion,” instantly dousing traders’ enthusiasm and restoring a touch of unpredictability to monetary policy, a quality Powell typically tries to avoid.
In the weeks since, officials more concerned about inflation than market tantrums have dominated the public conversation, pushing back against expectations of another December cut.
And then the shutdown struck again. On Wednesday, the government cancelled the October jobs report because the data could not be collected, a perfect metaphor for US governance in 2025. The November figures will now be released on 16 December, safely after the Fed’s last meeting of the year. Investors promptly trimmed their bets on a December cut, realising the Fed will be flying blind.
The minutes’ financial stability section did not inspire confidence either. Some officials warned of “stretched asset valuations,” while others delicately raised “the possibility of a disorderly fall in equity prices,” particularly if investors suddenly reassess the magical earnings promised by AI fairy-dust.
On the balance sheet, the Fed managed rare clarity: “almost all participants” supported stopping the runoff of securities on 1 December. The Fed has been shrinking its holdings since mid-2022, and officials now appear sufficiently nervous about liquidity strains, or about being blamed for them, to call time on the exercise.
Some market participants worry the Fed has already waited too long, allowing tight funding conditions to spill into overnight markets. But, as ever, the Fed insists everything is “orderly,” right up until the moment it isn’t.