Jerome Powell, chair of the U.S. Federal Reserve (Fed), said on the 29th (local time), "An additional rate cut at the Federal Open Market Committee (FOMC) meeting in December is not a foregone conclusion."
At a press conference after the FOMC's regular meeting that day, Powell said, "There was a very wide divergence among Commissioners even at this meeting," and drew a line, saying, "While markets seem to be taking an additional cut in December as a given, that is not the case."
The remarks were interpreted as "hawkish (favoring tightening)," contrary to the dovish stance the market had expected, heightening tension. In fact, according to CME FedWatch at the Chicago Mercantile Exchange (CME), the probability of an additional cut in December in the fed funds futures market fell to 66% from 91% in just one day.
The Fed lowered the benchmark rate by 0.25 percentage point to 3.75–4.00% that day. But internal differences were clear, with Jeffrey Schmid, president of the Federal Reserve Bank of Kansas City, arguing for a "hold," and Board Member Steven Miran calling for a "0.5 percentage point cut."
Powell formalized that the Fed will end quantitative tightening (QT; balance sheet reduction) on Dec. 1. He said funds from maturing mortgage-backed securities (MBS) will be reinvested in U.S. Treasury bills. "The recent tightening in short-term funding markets shows the Fed has reached the level it aimed for," he said.
Quantitative tightening is a policy in which the Fed reduces its bond holdings to absorb market liquidity, the opposite of quantitative easing (QE) after the pandemic. As short-term rates have surged recently and destabilized financial markets, Wall Street has floated the possibility that the Fed might halt QT.
On the relationship between tariff and inflation, Powell assessed, "Tariffs can give prices a temporary shock, but excluding that, the inflation rate has not deviated significantly from the Fed's target (2%)."
As for the suggestion that the recent surge in artificial intelligence (AI) data center investment could stoke expectations of rate cuts, he dismissed bubble concerns, saying, "Data center investment is more sensitive to technology demand than to interest rates."
Powell also mentioned the possibility of a federal government shutdown (temporary halt of operations), saying, "There may be delays in the release of economic indicators, but we will detect changes through private data."
His remarks that day increased uncertainty again over a December cut, and Wall Street interpreted them as the Fed shifting to "pace control."