Fed Split Into Three Camps Casts Doubt on December Rate Cut
According to WSJ reporter Nick Timiraos, the Federal Reserve has split into three camps—hawks favoring a pause, doves pushing for rate cuts, and centrists undecided. A delayed November jobs report due to the government shutdown has created a data vacuum, undermining evidence-based decision-making. As a result, market odds for a December rate cut have slumped from over 90% to around 30–50%. Chairman Jerome Powell faces a dilemma: cutting rates risks reigniting inflation driven by tariffs, while holding rates steady could dampen investment and heighten recession risk. The Fed’s former “autopilot” communication strategy has broken down, forcing investors to parse high-frequency data, speeches, and earnings for clues. Traders should brace for heightened volatility and adjust strategies to navigate increased policy uncertainty ahead of the December rate cut decision.
Bearish
The Fed split and the sharp decline in December rate cut odds increase monetary policy uncertainty, which typically weighs on risk assets such as cryptocurrencies. In past episodes—like the June 2023 Fed meeting—when rate-cut expectations were trimmed, Bitcoin and altcoins experienced downward pressure and heightened volatility. Here, a prolonged pause risks extending higher funding costs and dimming growth prospects, undermining bullish momentum. Short-term, traders should expect choppier price action around FOMC comments. Over the long term, persistent policy ambiguity may reduce institutional inflows into crypto, as investors favor safer yields elsewhere. Overall, this environment leans bearish for digital assets until clearer Fed guidance emerges.