Federal Reserve Governor Milan recently publicly stated that he personally predicts the Fed may cut interest rates again in December and warned that the current restrictive monetary policy could exacerbate the economy's vulnerability to shocks. This statement highlights the significant internal divergence within the Fed regarding the path of interest rate policy.
🏛 Policy stance and internal divergence
Milan's dovish stance is not new. As early as the September meeting, he argued that the Fed should cut rates faster at a pace of 50 basis points each time, believing that excessively high rates could make the economy more vulnerable to downward shocks due to overly tight policy. At the latest monetary policy meeting that ended on October 30, he again voted against the decision to cut rates by only 25 basis points, reiterating his support for a larger cut of 50 basis points. This contrasts with the views of other Fed officials, such as Kansas City Fed President George and Dallas Fed President Logan, who tend to favor keeping rates unchanged or taking a cautious approach to further rate cuts, reflecting significant divergence within the Fed on how to balance inflation risks with support for economic growth.
📊 Market Expectations and Data Dependence
Despite Milan's clear predictions, there is still uncertainty regarding the Federal Reserve's monetary policy direction in December. Federal Reserve Chairman Powell emphasized at the press conference on October 30 that whether to further cut interest rates in December is "far from a done deal," and future decisions will strictly depend on subsequent economic data releases, including the performance of the labor market and inflation. This cautious statement has led to a decline in the market's expectations of a rate cut in December from previously high levels. According to the latest data from CME's "FedWatch" tool, as of October 31, the market estimates the probability of a 25 basis point rate cut by the Fed in December at approximately 74.7%. Some market institutions, such as Huatai Securities, also analyze that despite the variables, a continued rate cut in December remains the baseline scenario.
💎 Summary
In summary, Federal Reserve Governor Milan explicitly predicts that there will be another rate cut in December and continues to call for more accommodative monetary policy. However, due to differing opinions within the Federal Reserve and the policy decisions being highly dependent on key economic data in the coming weeks, it is currently uncertain whether there will be a rate cut in December. Investors need to closely monitor the upcoming employment and inflation data, as well as further statements from Federal Reserve officials.