Difficult to cut interest rates next year? The Federal Reserve is filled with "silent dissents" internally, and officials' serious disagreements are affecting the prospects for easing.

Federal Reserve Chairman Powell downplayed the dissenting votes in Wednesday's decision to cut rates again, but details from the meeting show serious internal divisions within the Federal Reserve. Powell went against the majority and pushed through the decision to cut rates by 25 basis points. Several regional Federal Reserve presidents who were participating in the discussion but are not voting members this year also expressed opposition to the rate cut. These fractures could foreshadow challenges in 2026, as the new chair may face even greater difficulties in building consensus within the Federal Reserve compared to Powell. Only two policymakers - Kansas City Fed President Jeff Schnidt and Chicago Fed President Austan Goolsbee - formally dissented, advocating for keeping rates unchanged. Another dissenter was Federal Reserve Board Member Stephen Milne, who continued to call for a larger rate cut. The remaining dissenting opinions were expressed through other channels. "This is very unusual. In the over ten years that I've been involved with the Federal Reserve, I have never seen a situation like this," Philadelphia Fed President Patrick Harker said, who retired in June of this year. In the quarterly interest rate forecasts released with the Fed's decision, six policymakers indicated that the benchmark federal funds rate should stay in the range of 3.75% to 4% by the end of 2025 - the same level as before Wednesday's rate cut - indicating their opposition to the rate cut. Given that the dissenting officials did not have voting rights at the meeting, some Fed observers referred to the high rate forecast for 2025 as a "silent dissent." Harker said, "I would have been one of those silent dissenters. I believe the rate cut was a mistake." Another clue hidden in the documents released by the Fed on Wednesday is the opinions of members of the regional Federal Reserve Bank committees composed of business leaders. They submit a separate short-term rate recommendation to the Fed, which typically follows the main base rate fluctuations. This recommendation usually reflects the personal preferences of bank presidents. This time, only 4 out of 12 regional banks requested a rate cut, indicating that may be 8 bank presidents dissenting. Powell stated in a post-meeting press conference that the current economic conditions - with inflation still well above the Fed's 2% target and signs of weakness in the labor market - were reasons for the dissent. Powell said, "Many participants believe that the risks to unemployment and inflation are both elevated, so what do you do? You have only one tool, you can't do both simultaneously. It's a very tough situation." However, because many policymakers are willing to make their dissent known through "silent" and formal opposition, whoever Trump chooses to replace Powell next year - including front-runners for the position, like White House National Economic Council Director Kevin Hassett - may face challenges in controlling the Federal Open Market Committee. Calvin Tse, Head of U.S. Strategy and Economics at France's Paris Bank, said, "Chairman Powell has been in office for a long time and has a high reputation within the Federal Open Market Committee (FOMC). Even under his leadership, there are still three members who oppose the decision, I find it hard to imagine any new Fed chair will find it easier to gain unanimous agreement from FOMC members." Of course, the resistance the Federal Reserve faces is not insurmountable. New data could change the economic situation. While the Fed's median forecast points to one rate cut in 2026, investors still expect two rate cuts. In fact, those who voted in favor of cutting rates this week may see the increase in initial jobless claims reported on Thursday as somewhat validating their cautious stance on the labor market. A report released by the U.S. Department of Labor on Thursday showed that initial jobless claims rose by 44,000 to 236,000 in the week ending December 6, marking the highest increase since the outbreak of the pandemic. While jobless claims data typically fluctuate significantly, given recent layoffs by companies like PepsiCo and HP, the rise in initial jobless claims may be an early sign of trouble in the labor market. In the coming weeks, policymakers will receive a wealth of information to help them understand the labor market and inflation situation. While some October data will not be released, policymakers will have access to November and December economic data before their next meeting at the end of January. Veronica Clark, an economist at Citigroup, said, "It's reasonable for there to be differences of opinion among officials at the moment, as the data is sending conflicting signals. I think next year's data may help to unify opinions to some extent."