"With the Federal Reserve split between increasingly hawkish and increasingly dovish policymakers, Chairman Jerome Powell is due to perform some serious log-rolling when the central bank meets this week. Another rate cut is a near certainty after the Fed meeting ends on Wednesday, but the main question is what Powell will say about the prospects for more easing next month."
"Wall Street expects a hawkish cut, meaning Powell is likely to avoid signaling a January cut to appease Fed hawks, after joining doves to lower rates this month. "Chair Powell is facing the most divided committee in recent memory," analysts at Bank of America said in a note on Friday. "Therefore, we think he will attempt to balance the expected rate cut with a hawkish stance at the press conference, just as he did in October.""
"But at the same time, the Fed chief has also been insistent that policymakers are not on a pre-determined course and that rate moves depend on the data that come in. As a result, BofA is doubtful that he can pull off a hawkish cut so easily, considering all the market-moving data that will come out between the two meetings, with some delayed due to the government shutdown."
The Federal Reserve is divided between hawkish and dovish policymakers, forcing Chair Jerome Powell to balance competing views at the upcoming meeting. A rate cut this week is nearly certain, while the key question is whether Powell will signal further easing in January. Wall Street expects a hawkish cut that avoids committing to a January move to appease hawks, but Bank of America doubts Powell can convincingly convey restraint given incoming market-moving data. Upcoming releases include October and November jobs, October retail sales, November CPI, and December readings that could determine the January decision. Powell could require significant jobs weakening or argue that 3.5%-3.75% is not restrictive after inflation.
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