Fed Minutes Reveal Split Over October Rate Cut and Uncertainty About December Decision

The Federal Reserve’s newly released minutes from its 29 October 2025 policy meeting show policymakers sharply divided over the decision to reduce the federal funds rate and increasingly doubtful about delivering another cut in December. The document highlights contrasting assessments of labor-market weakness and persistent inflation, underscoring the challenge of determining how restrictive current policy remains.

Rate Cut Approved, but Opinions Diverged

The Federal Open Market Committee (FOMC) voted 10–2 to lower its benchmark overnight rate by 0.25 percentage point to a target range of 3.75%–4%. Despite the majority vote, the minutes indicate three distinct camps. Many participants believed the October reduction was needed to cushion a cooling jobs market. Several felt a cut was defensible but could also have supported holding rates steady, while several others opposed easing altogether, arguing policy was not yet sufficiently restrictive to control prices.

One participant favored an even larger, 0.50-point move, while another preferred no change. Governors identified in public remarks as favoring additional accommodation include Stephen Miran, Christopher Waller and Michelle Bowman. Regional presidents Jeffrey Schmid of Kansas City, Susan Collins of Boston and Alberto Musalem of St. Louis have cautioned that further cuts could jeopardize the central bank’s 2% inflation goal. Chair Jerome Powell, Vice Chair Philip Jefferson and New York Fed President John Williams have adopted a more measured stance.

December Outlook Less Certain

The minutes reveal that many participants—Fed terminology indicating more than “several”—do not currently see a need for another cut this year, while several still consider a December move appropriate if economic data evolve as expected. Because the term “participants” includes both voting and non-voting officials, the document leaves ambiguous how the 12 voting members may align in December.

Market expectations shifted after Powell’s post-meeting press conference, where he said a December reduction was “not a foregone conclusion.” Following those remarks, futures trading that had nearly fully priced in a cut at the 9–10 December meeting adjusted to reflect less than a one-in-three probability.

Inflation and Labor Market in Focus

Policymakers confronted conflicting signals. On one hand, payroll growth has moderated and vacancy rates have narrowed, suggesting softer labor demand. On the other, core inflation has shown limited progress toward the 2% objective. The minutes state that inflation “has shown little sign of returning sustainably” to target, a concern for officials wary of easing too quickly.

A key point of disagreement was how to gauge the overall restrictiveness of current policy. Some members argued that, even after October’s quarter-point cut, interest rates continue to restrain economic activity. Others pointed to resilient gross domestic product growth as evidence that monetary settings may not be tight enough.

Data Gaps Complicate Deliberations

The meeting occurred during a 44-day federal government shutdown, which delayed publication of several economic indicators. Labor force statistics, price indexes and other reports were unavailable, leaving committee members to rely on private data and qualitative information. Powell likened the situation to “driving in the fog,” though Governor Waller later countered that the Fed still had adequate information to set policy.

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Federal statistical agencies have since outlined revised release schedules, but not all postponed data have been rescheduled. The absence of timely figures was cited as one reason several officials advocated patience before considering another rate adjustment.

Balance Sheet Strategy Adjusted

Beyond interest rates, the committee agreed to halt the runoff of Treasury and mortgage-backed securities in December, ending a quantitative-tightening effort that has trimmed more than $2.5 trillion from the central bank’s holdings. The balance sheet remains near $6.6 trillion. Minutes indicate broad support for pausing the drawdown, with members judging that continued reductions could tighten financial conditions in unintended ways.

Future Path Still Open

Most participants expect additional rate cuts will eventually be warranted, but timing remains uncertain. The degree to which inflation moderates and the labor market cools will shape decisions at upcoming meetings. Analysts continue to monitor speeches and public comments by committee members, noting that diverging views could widen if near-term data surprise in either direction.

For background on recent FOMC actions and policy frameworks, the Board of Governors provides extensive documentation on its monetary policy page at the Federal Reserve’s official website.

Crédito da imagem: Kevin Lamarque / Reuters