FOMC Commentary: The Fed Remains Cautious About Further Rate Cuts in December

■ To address the ongoing slowdown in the labor market and maintain an accommodative stance, the Federal Reserve decided to cut interest rates by 0.25 percentage points at two consecutive meetings.  

■ Due to delays in releasing US economic data and the difficulty in assessing the true state of the economy, the Fed is reserving policy flexibility for its December meeting. 
 
  At its Federal Open Market Committee (FOMC) meeting held on September 28-29, the Federal Reserve (FRB) cut interest rates by 0.25 percentage points for the second consecutive time since September, bringing the policy rate to 3.75-4.00%. Additionally, it announced the end of the balance sheet reduction (quantitative tightening, QT) initiated in June 2022, effective December 1. 
   The statement reaffirmed concerns about slowing job growth and noted that inflation remains relatively high. Regarding economic growth, the FRB views the trend as moderate but acknowledges high uncertainty about future developments. It also highlighted that downside risks to employment have increased recently. Based on this, the FRB stated it will adjust policy as necessary if risks emerge that could impede achieving its goals, taking into account a broad range of information, including labor market conditions, inflation pressures and expectations, financial stability, and global developments. 
 
   At the FOMC press conference following the meeting, FRB Chairman Jerome Powell clarified that a December rate cut is not a predetermined plan, and policy will not proceed along a set path. During the meeting, FRB Governor Stephen Miran reiterated his call for a 0.50 percentage point rate cut, while Kansas City Fed President Schmid supported maintaining the current rate. Disagreements surfaced within the FRB concerning the balance of risks in the labor market and the neutral interest rate level. Powell noted that some FOMC members preferred to pause rate cuts, partly because data have been limited due to the partial government shutdown, which could reinforce a cautious stance. 
 

   The September Consumer Price Index (CPI) showed that core CPI, excluding energy and food, slowed to 3.0% year-on-year, but upward pressure from tariff increases persisted. Current reports indicate that the October CPI will not be released in November, and the release date for September employment data remains uncertain. Given the challenges in understanding the true state of the US economy, reliance on private sector data will be essential in the short term. It is too early to determine whether the upcoming December 9-10 meeting will keep interest rates unchanged. In the near term, market attention will likely focus on the upcoming ISM manufacturing and non-manufacturing indices, scheduled for release on November 4 and 5.d 5.