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With the federal government shutdown now over, until the end of January at a minimum, the money and bond markets have turned their attention back to the Fed. Specifically, the conjecture is centered on whether another rate cut will be forthcoming at the December 10 FOMC meeting. While the markets' mindset still leans toward another easing move, based upon recent comments from policy makers themselves, it is appearing as if the Fed could be becoming somewhat of a "house divided."

The first sign of some fracture occurred at the October FOMC meeting, where there were two dissents, but the dissents came from two different perspectives. On the one hand, Governor Miran preferred a more aggressive 50-bp rate cut, while Kansas City Fed President Schmid was in favor of no rate cut at all.

Interestingly, this is where the "divide" is centered. It appears as if the "governor" contingent is more amenable to future declines in the Fed Funds trading range, but the regional bank presidents have taken a more cautious stance and, at times, questioned whether any further rate cuts are needed at all.

In fact, just last week, six regional bank presidents, San Francisco's Daly, Minneapolis's Kashkari, St. Louis's Musalem, Boston's Collins, Dallas's Logan and Cleveland's Hammack, all stated in one form or another that policy needed to be cautious and mindful of stubborn inflation, which remains "too high." In addition, Kashkari even went so far as to say that the "resilient economy called for a rate pause in October." Then on Friday, KC President Schmid "doubled down" on his aforementioned dissent by saying that "further rate cuts won't patch job market cracks but could drive inflation pressures."

For those counting, that is half of the total number of Fed regional bank presidents. In fact, three out of the six presidents mentioned above are also voting members on the FOMC. It seems more than just a coincidence that these Fed presidents are all publicly expressing their views at this point. Even if the Fed Chair is of a different opinion, typically, they try to find some consensus to appease the possible dissenters. That is more than likely why Powell stated at the October FOMC presser that a December rate cut was "far from" a foregone conclusion.

What about the data, you may be asking? There is no doubt the Fed remains highly data-dependent, and obviously, the shutdown made things more "foggy." Economic reports will probably begin flowing in the weeks, if not days, ahead. However, some October data may be missing, such as the unemployment rate and CPI, because they are based on household surveys that never took place.

Conclusion

No matter what Fed officials may be saying, it will all come down to the data, specifically the labor market data. On that front, according to the Bureau of Labor Statistics, the September jobs report (which will include nonfarm payrolls AND the unemployment rate) is scheduled to be released this week on November 20, so some of the "data fog" for the Fed should begin to get lifted.

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