Wall Street expects Powell to "hawkishly cut rates" this week, with the Fed facing its biggest internal dissent in years

Dec. 8 — While another Federal Reserve rate cut is all but certain, the key question is how Chair Jerome Powell will frame the outlook for further monetary easing next month. With Fed policymakers split increasingly between hawks and doves, Powell faces a tricky balancing act at this week’s central bank meeting. Wall Street is betting on a “hawkish rate cut”: after delivering this month’s dovish-aligned cut, Powell may refrain from signaling a January rate reduction to placate the Fed’s hawkish wing. In a report Friday, a Bank of America analyst noted: “Powell is confronting the most divided FOMC in recent years. As such, we expect he’ll again balance the expected rate cut with a hawkish tone at the press conference, as he did in October.” But the Fed chair has repeatedly stressed policymakers have no preset policy path — rate moves will hinge on incoming data. For that reason, BofA is doubtful Powell can pull off the “hawkish rate cut” easily, particularly given the slew of market-sensitive data set to be released between the two meetings, some delayed by the government shutdown. Similarly, Michael Feroli, JPMorgan’s chief U.S. economist, said he expects Powell to highlight that after this week’s cut, interest rates will be near the neutral level. Any further easing, he added, will require a significant deterioration in the labor market — not just risk management considerations. (Jinshi)