The Federal Reserve announced a 25 basis point rate cut as scheduled, followed by the Central Bank of the United Arab Emirates, the Central Bank of Qatar, the Central Bank of Bahrain, and the Central Bank of Saudi Arabia collectively announced a 25 basis point rate cut. However, the focus of the market is Powell's view of future policy. Powell said at a press conference that officials are clearly divided on how to act in December, and it is not certain that interest rates will be cut again in December.

Powell's remarks were immediate, reversing market optimism, and the probability of a rate cut in December plummeted from 95% to 65%. "A growing number of officials" within the Fed have questioned the need for further rate cuts. This means that this round of "easy period of interest rate cuts" may have passed.

With each rate cut, a question becomes more and more urgent: when should it stop?

The Fed quarreled internally, and the voting results were rare "three parties against each other"

The decision to cut interest rates was passed with 10 votes in favor and 2 against, but the details of the vote exposed serious divisions within the Fed.

One official (the president of the Kansas City Fed) voted against the idea that interest rates should remain unchanged for now; Another official (Fed governor) also objected, but he thought the opposite, advocating a direct cut of 50 basis points at a time. This shows that the Fed is not only not monolithic, but there are "three voices": some people want to stop, some want to cut less, and some people want to cut sharply.

Even Powell admitted that views within the committee are "very different", and more and more people are questioning: Should we continue to cut interest rates now?

Why would anyone want to stop? Although most officials predicted in September that it would fall twice more this year (hinting at a drop in December), some people opposed it at the time. Their biggest concern is inflation.

Over the past few years, U.S. prices have been above the Fed's 2% target, and inflation has stopped falling this year and even rebounded. An important reason is that Trump's tariffs have pushed up commodity prices. This has made some officials feel that if the economy is okay and inflation cannot be suppressed, they should not rush to cut interest rates.

The market was caught off guard, and Powell's "hawkish" attitude this time surprised the market, which almost expected a rate cut in December.

Now, analysts are also arguing. The chief economist of BNY Mellon Investments believes that it is difficult to prove that "interest rates should not be cut" due to the lack of new data. Therefore, it is easier to continue cutting interest rates than to stop abruptly, and the possibility of not cutting in December is actually very small.

The dean of Purdue Business School (former Fed chairman) said: Whether to cut interest rates in December is far from simple. Strong consumption, good economic growth, and inflation not improving are all reasons to slow down interest rate cuts. He also questioned: Is it "poor enough employment" to add 50,000 new jobs every month in the future? Is this standard too low?

Opinions within the Fed are divided, some want to stop, some want to cut quickly. Powell's statement made the market realize that the December rate cut is no longer "stable". What to do next may depend on next month's employment and inflation data.

The government shutdown has led to data "breakage", making it harder for the Fed to make decisions

Now the Fed faces a big problem: the US government shutdown, key economic data is "broken".

Powell said that if officials cannot see the economic trend clearly because of the lack of data, this "high degree of uncertainty" itself should make them more careful and not rush to make decisions.

Usually, employment, inflation and other reports released before each meeting can help officials unify their understanding. But now, especially the most important employment data has not come out, everyone is like "driving blindfolded", unable to judge whether interest rates should be cut or not.

William English, a professor at Yale University and a former Fed adviser, pointed out that from September to now, the Fed has not learned much new things due to the lack of new data. Their judgment may still be in September, but there is growing uncertainty about the future.

Bank of America analyzed three possible scenarios:

Situation 1: The government only opened at
the end of November and had to release a September employment report (outdated) before the December meeting. If the data is poor, it may silence those who were originally opposed to interest rate cuts and push for interest rate cuts; But if the data is good, it may be because it is "too old" and no one believes it, and it is still difficult to prevent interest rate cuts.

Situation 2: The government opened its doors
in early November and can see the two employment reports for September and October before the meeting. If the data shows that the unemployment rate is stable and the economy is not bad, then it is really possible that the Fed will pause interest rate cuts in December.

Situation 3: The government opens its doors quickly

You can see the complete data for September, October, and November before the meeting. Bank of America puts forward a simple criterion:

The government shuts down and the data is "broken", making it more difficult for the Fed to judge whether the economy is hot or cold. Whether to cut interest rates in the next December largely depends on when the government opens its doors and how much new data can be obtained after that. Now, not only the economy is waiting for data, but also the Fed's decision-making is "waiting for news"

Inflation and employment, the Fed is in a dilemma

Now, the focus of the debate within the Fed is that while fearing that inflation cannot be suppressed, it is also afraid that the economy will not be able to hold on

One fear: if it falls too much, inflation will rebound. Some officials are worried that if interest rates are cut too hard and too quickly, it may stimulate the economy to overheat, making inflation already above target (above 2% in the long term) more difficult to control. And the recent rise in the stock market in anticipation of interest rate cuts has also made the central bank worry: Will there be a bubble in the financial market?

So they advocate "slow down" and don't rush to plummet.

The second fear: if it doesn't fall, the economy will be hurt. Other officials are more worried about the economic downturn. The impact of past interest rate hikes is slowly emerging, especially on interest rate-sensitive industries such as mortgages and car loans. Coupled with policy changes such as the trade war, low-income households and small businesses are getting tighter and tighter, and consumption is beginning to shrink

Recently, a number of large companies announced layoffs, especially in white-collar jobs. This raises concerns: Has the job market begun to weaken? Employment is at the heart of this debate. While inflation data is still "holding up", this summer's employment report has deteriorated significantly: from June to August, an average of only about 29,000 new jobs were added per month, compared with 82,000 in the same period last year

Such a big gap made the Fed decide to restart interest rate cuts. But now the question is: why is employment getting worse? Is it because there are fewer people looking for a job? Or does the company not need people at all? If it is the latter, it means that there is really a problem with the economy and it must be saved quickly; But if it's just the former, it may not be so serious.

At present, without clearer evidence of a significant deterioration in employment, it is difficult to get enough support if you want to cut it by 50 basis points at a time. Most officials still prefer to reduce by 25 basis points at a time.

But the problem is that with each drop, it becomes more difficult to decide on the next step. continue to fall, afraid that inflation will return; Stop, but I am afraid that the economy will not be able to hold on. The Fed is now walking on a tightrope, with inflation risks in front and economic slowdown pressures behind, and every step must be careful.

Jingtai view: In the last two months of 2025, the biggest risk is not "whether interest rates will be cut", but "whether you are still living in the fantasy of 'it will definitely fall'". 1Late January to early December is the key observation period. Long-term configuration recommendations: