Hawkish forces are looming; the Fed's December meeting may see multiple dissenting votes.

Xiao Yanyan, Jinshi Data

Minneapolis Federal Reserve President Kashkari stated that he previously did not support the Fed's last rate cut, but he has not yet made a decision regarding the best course of action for the December policy meeting.

“A great deal of field research evidence and data has shown me that the inherent resilience of economic activity has exceeded my expectations,” Kashkari said in an interview with Bloomberg News on Thursday. He pointed out that this was precisely the reason he advocated for a pause in rate cuts at the Fed's October meeting.

Kashkari stated that subsequent data continued to point to the economy “continuing the same trend.”

Kashkari said that subsequent data continued to point to the economy “continuing the same trend.”

Regarding the upcoming interest rate decision meeting on December 9-10, he frankly stated, "Depending on the data, I can offer arguments for a rate cut, or I can offer reasons for holding rates steady; it all remains to be seen." This statement places Kashkari among a number of Federal Reserve officials who have recently expressed doubts or outright opposition to a December rate cut. It remains unclear whether they can persuade enough voting members of the Federal Open Market Committee (FOMC), as many policymakers are still more concerned about the weakness in the labor market. While the Minneapolis Fed president does not have a vote on interest rate decisions this year, he still participates in FOMC policy discussions. Financial markets have noticed the recent flurry of pronouncements from the Fed's so-called "inflation hawks." According to federal funds futures contracts, investors have lowered the probability of a December rate cut to approximately 47%. Prior to the October Fed meeting, the market expected a rate cut probability as high as 100%. After the Federal Reserve implemented its first rate cut of the year in September, Kashkari predicted two more rate cuts in 2025. He revealed on Thursday that he believed the economic slowdown was becoming more pronounced at the time. "The constant stream of negative news about low-income borrowers—subprime borrowers and subprime businesses serving the subprime market—seems to indicate a genuine localized weakness in the labor market," he analyzed. "But at the same time, most companies have reported solid earnings, and many are optimistic about the outlook for 2026." Kashkari wasn't the only one hoping to obtain more data before the final policy meeting of the year. San Francisco Fed President Daly also expressed uncertainty about the direction of the meeting earlier that day. "It's too early to say 'there will be no rate cut' or 'there will definitely be a rate cut,'" Daly said at an event in Dublin, adding that the direction of policy change currently appears "neutral." However, some officials have already stated their position on the year-end meeting, and a growing number of officials advocate maintaining stable interest rates. Hammark emphasizes that interest rates should continue to curb the economy. Cleveland Fed President Hammark stated that the Fed should maintain stable interest rates to continue to curb inflation. "Overall, we need to maintain a certain level of restraint and continue to exert pressure to bring inflation back to the target level," Hammark said in a fireside chat at the Pittsburgh Economic Club on Thursday. Hammark reiterated his earlier views, noting that while he is concerned about the labor market, high inflation persists, particularly impacting low- and middle-income families. Federal Reserve officials cut the benchmark interest rate to a range of 3.75%-4% last month, close to or reaching a level some policymakers predicted would "no longer constrain the economy." However, Hamak believes that current interest rates, "even if restrictive, are quite limited," and revealed that her forecast for the so-called neutral interest rate is at the top of the range predicted by 19 Fed officials. "To maintain a restrictive stance, we need to keep interest rates near their current levels," she emphasized. Hamak expects inflationary pressures to persist until the end of this year and into early next year. She pointed out that businesses have already absorbed a significant amount of the inflationary costs caused by tariffs, but are now seeking ways to pass on these cost increases to consumers. The hawkish camp continues to expand. Boston Fed President Susan Collins said on Wednesday that interest rates should remain at current levels for "some time" to strike a balance between 3% inflation and weak hiring in the labor market. Inflation is currently still above the Fed's 2% target. She noted that still strong economic growth could slow or even hinder the cooling of inflation. Even officials who were previously more vocal in supporting rate cuts, including Chicago Fed President Goolsby, have expressed similar views in recent weeks. They are joining a more hawkish camp within the Fed, including policymakers such as Kansas City Fed President Schmid, Cleveland Fed President Hammark, and Dallas Fed President Logan, who have all warned against further rate cuts. Meanwhile, Federal Reserve Governors Milan, Waller, and Bowman advocate for interest rate cuts. Milan, the latest Fed official appointed by Trump earlier this year, stated that inflation data was better than expected, providing support for lowering rates. With the government shutdown ending and agencies resuming the release of official statistics, Fed officials will regain access to up-to-date information on the state of the U.S. economy. However, it remains unclear how much new data will be available in time for the December meeting. The December meeting may see more dissenting votes. Regardless of the decision made in December, Fed Chairman Powell may face a more intense situation than the two dissenting votes he received last month—when Kansas City Fed President Schmid opposed further easing on the grounds of high inflation, while Governor Milan argued that inflation was falling faster than generally perceived and advocated for a more aggressive 50-basis-point rate cut. Subsequently, several of the 12 Federal Reserve policymakers with voting rights on interest rates expressed caution regarding further rate cuts. St. Louis Fed President Musaleem reiterated on Thursday that monetary policy needs to "countercyclically curb" inflation, while Fed Vice Chairman Jefferson emphasized the need for a cautious pace, especially during periods of limited official data. Non-voting policymakers, including Atlanta Fed President Bostic and Cleveland Fed President Hamak, also expressed a preference for maintaining stable interest rates. "Boston Fed President Collins's explicit opposition to a December rate cut has exacerbated our concerns about Powell's ability to manage internal divisions within the FOMC and adds further uncertainty to the interest rate path," wrote Krishna Guha, Vice President of Evercore ISI, in a report on Thursday. He pointed out that if the Federal Reserve insists on cutting interest rates, Collins, Musalaim, and even Chicago Fed President Goolsby or Fed Governor Barr might vote against it, just like Schmid; if the rate is kept unchanged, Milan's vote against it might be supported by the other two Trump-appointed Fed Governors, Waller and Bowman.