Fed Divisions Deepen Ahead of December Meeting as Data Blackout Muddies the View

Federal Reserve officials are heading into their December 10–11 meeting far less united than they were on the back-to-back rate cuts in September and October, according to reporting from the Wall Street Journal’s Nick Timiraos and summarized by Investing.com. The central bank has already lowered its benchmark rate by a quarter point twice in a row, but a third consecutive cut is no longer a foregone conclusion. Instead, the Fed is split along a familiar fault line: officials who think sticky, tariff-boosted inflation is still the bigger threat, and officials who worry that a cooling labor market and slowing activity will do more damage if policy stays too tight. That disagreement, normally smoothed over by fresh economic reports, has been sharpened by the longest U.S. government shutdown on record, which temporarily blocked the release of key inflation and jobs data the Fed relies on. Investing.com+1

Markets, for now, are still leaning toward a cut. CME FedWatch data showed traders pricing about a 62% probability of a 25-basis-point reduction in December and roughly a 38% chance that the Fed stays on hold—hardly a slam dunk for easing, and a far cry from the near-certainty that followed the October move. That shift in pricing reflects something Fed Chair Jerome Powell has been trying to tell investors since his October 29 press conference: “a further reduction … is not a foregone conclusion.” He reminded reporters that policymakers had “strongly differing views” at the last meeting, and that the committee wanted to see actual data before deciding whether the September–October cuts were enough. With no data coming in during most of the shutdown, both the hawks and the doves have been arguing from instinct, anecdotes, and private indicators—never a recipe for consensus. Investing.com+1

On the hawkish side are officials pointing to prices that have proved stubborn precisely because of recent policy shocks. New tariffs and immigration-related frictions have kept some input costs elevated and encouraged firms to pass those costs on. From that vantage point, cutting again in December risks validating inflation that hasn’t yet made a clean return to 2%. These members note that the Fed has already delivered two “insurance” cuts; a third, in their view, should require clearer evidence that the economy is actually weakening, not just plateauing. They also don’t want to repeat 2019, when the Fed eased three times only to find that parts of the economy were still running hot. Le Wall Street Journal+1

Lined up on the other side are officials who see more danger in labor and growth. Hiring has softened, some regional surveys have turned down, and business investment remains patchy. With policy still in restrictive territory after the 2022–2024 tightening cycle, doves argue that waiting too long risks an unnecessarily hard landing. For them, the shutdown was especially frustrating: it robbed the Fed of precisely the payrolls, CPI and PCE prints that would have made the case for another cut. Now that Congress is moving to reopen the government, those reports will be released in a compressed window before the December meeting—giving both camps one last batch of numbers to brandish. If those data points confirm softer jobs and cooling inflation, the doves will have the upper hand; if they show resilience or renewed price pressure, the hawks will say “we told you so.” Investing.com+1

Powell is trying to steer between them. He has already pushed back against the market habit of assuming the Fed will “just keep cutting” once it starts, stressing that every move will be data-dependent. At the same time, he knows a third dissent-riddled meeting would send a bad signal about the committee’s ability to manage a two-sided economy—an economy where inflation is no longer falling in a straight line but growth is no longer roaring either. One option being floated in policy circles, according to the WSJ account, is a compromise: a December cut paired with guidance that future moves will slow or pause unless the data forces the Fed’s hand. That would acknowledge the labor-market risk without giving markets licence to price in an aggressive 2026 easing cycle. Le Wall Street Journal+1

What makes this debate so market-sensitive is timing. The Fed has already done the easy part—moving off the cycle’s peak and showing it can respond to a cooling economy. Now comes the harder part: deciding how fast to proceed when inflation is being nudged by policy-driven factors (tariffs, supply frictions) that monetary policy can’t fully offset. Cut too quickly, and the Fed could find inflation expectations drifting up again. Cut too slowly, and it could let weaker hiring turn into weaker spending. That is why the normally soft-spoken Timiraos piece hit a nerve on trading desks: when “the Fed whisperer” says officials are increasingly fractured, it usually means the decision is genuinely up in the air. Blockonomi+1

For investors, the message is to watch the incoming data even more closely than usual. The release of the delayed labor and inflation reports now becomes a de facto pre-meeting: strong numbers will push the odds of a cut down, softer numbers will lock it in. Until then, the Fed will look less like a single voice and more like what it really is right now—nineteen officials looking at incomplete information and coming to different, defensible conclusions.

Sources: Investing.com, “Fed increasingly fractured over Dec rate cut – WSJ’s Timiraos”; Wall Street Journal coverage by Nick Timiraos on divisions inside the Fed over a December move; CME FedWatch data on December 10–11 probabilities; Fed Chair Jerome Powell’s Oct. 29, 2025 press conference transcript. Réserve fédérale+3Investing.com+3Le Wall Street Journal+3