Fed Faces Dilemma Balancing Inflation Management and Job Market Stability Ahead of December Decision

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Fed Faces Dilemma Balancing Inflation Management and Job Market Stability Ahead of December Decision

Bitget-RWA2025/11/23 02:50

By:Bitget-RWA

- The Fed faces divided views on December rate cuts amid 39.6% odds of a 25-basis-point reduction versus 60.4% no-change probability. - Officials weigh inflation (3% vs 2% target) against resilient labor market (119,000 September jobs), complicating dual mandate balancing. - Bitcoin volatility ($81,629) and equity market jitters reflect uncertainty, with leveraged crypto positions facing margin pressures. - Corporate debt issuance for AI infrastructure and delayed economic reports heighten borrowing cost r

The Federal Reserve's upcoming December rate decision has captured the attention of financial markets, with both traders and analysts split on whether the central bank will lower interest rates amid mixed economic signals. As of November 21,

the chance of a 25-basis-point rate cut

in December was at 39.6%, while

the odds of rates staying unchanged

stood at 60.4%. This ambiguity highlights disagreements within the Fed itself, as officials

remain split over whether to extend

the recent trend of easing after two straight rate reductions in September and October.

The Fed's dual goals—keeping inflation in check and supporting maximum employment—have made the decision process more complex. Although inflation has cooled to 3% from a nearly five-year high, it is still above the 2% target,

leading some Fed members to warn

against moving too quickly to cut rates. At the same time, the job market has remained strong, with September's employment data showing 119,000 new jobs, surpassing predictions of a slowdown. Fed Chair Jerome Powell has stressed that a December rate cut is not "a given," emphasizing the need for additional data as a backlog of economic reports persists due to the recent government shutdown.

Fed Faces Dilemma Balancing Inflation Management and Job Market Stability Ahead of December Decision image 0

Bitcoin, which briefly surged above $84,000 after dovish comments from New York Fed President John Williams, continues to experience volatility as market expectations shift. The digital currency's value

dropped to $81,629 on November 21

, mirroring broader market unease as investors adjust to the possibility of the Fed pausing its rate cuts.

The downturn in crypto assets

echoed losses in the stock market, though the Dow Jones Industrial Average and S&P 500 futures posted slight gains after a week of turbulence driven by AI sector swings and worries over high valuations.

The uncertainty around Fed policy has also affected corporate strategies. Large tech firms such as Amazon are raising capital to invest in AI infrastructure, while

leveraged positions in crypto are under margin stress

as open interest in

Bitcoin

futures contracts has dropped 35% from its October high.

Experts point out that if the Fed holds rates steady

it could keep borrowing costs elevated for consumers, worsening cost-of-living pressures even as the broader economy remains robust.

With the Federal Open Market Committee scheduled to convene on December 9-10, investors are closely watching to see if the Fed will focus on inflation threats or prioritize employment stability. The delay in releasing key economic data, such as October's jobs report, has further clouded the outlook,

with Fed officials admitting

the difficulty of "navigating through the fog." For now, the central bank's next steps will depend on whether new data supports a rate cut or strengthens the argument for holding steady.

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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