Fed Split on December Rate Cut Amid Data Freeze
Nick Timiraos of the Wall Street Journal warns that the Fed lacks consensus on a December rate cut. Government shutdown has halted key labor and inflation data since October 1. Fed Chair Jerome Powell likened the situation to driving in fog. Following two rate cuts in September and October, the federal funds target stands at 3.75%–4%. Powell stated that a December rate cut is "far from guaranteed." Market odds for a cut in December plunged from near 100% to 63%–75%, according to SSGA. With official data dark, traders rely on private surveys with inconsistent coverage. Gold surged to $4,050 per ounce, reflecting elevated risk appetite. Internal Fed debates focus on three issues: inflation control, labor market weakness, and whether current rates are still restrictive. Hawks warn that easing risks reigniting inflation. Doves point to slow hiring gains and rising unemployment. Powell publicly highlighted Fed division to temper market bets on a specific outcome. Even if shutdown ends, the Fed may lean on qualitative indicators to guide policy. Uncertainty over a December rate cut continues to fuel market volatility and could reshape global capital flows.
Bearish
The Fed’s pronounced lack of consensus and the data blackout caused by the government shutdown create high policy uncertainty. History shows that unclear Fed guidance and missing economic reports tend to dampen risk appetite and trigger sell-offs in volatile assets, including cryptocurrencies. In the short term, traders may reduce exposure as odds for a December rate cut fall, leading to heightened volatility. Over the long run, delayed cuts or mixed signals could suppress sustained inflows into digital assets. While potential future easing might eventually support crypto prices, current ambiguity weighs on bullish momentum.