FOMC Minutes Reveal Growing Policy Divide as Fed Shifts to “Wait and Watch” Mode — Evening Brief – 11.19.25
The minutes from the Federal Open Market Committee’s October 28–29 meeting show a central bank increasingly split over the path ahead. While policymakers agreed to cut rates by 25 basis points, the discussion revealed sharply differing views on inflation, labor-market risks, and whether additional easing is appropriate before year-end. The tone of the minutes suggests a Fed leaning toward a more cautious, data-dependent approach, with markets now pricing less than a 50% chance of a December cut.
“Participants expressed strongly differing views about what policy decision would most likely be appropriate at the Committee’s December meeting,” the minutes noted. While many supported October’s cut, some said they could have backed holding rates steady, and several opposed cutting at all. The divide reflects conflicting assessments of the inflation threat: some officials said inflation excluding tariff effects was close to target, while many others stressed that overall price growth remains well above 2% with little evidence of a sustainable return.
Labor-market risks are also rising. Officials expect hiring to “soften gradually,” describing a market that is less dynamic but not yet alarming—businesses remain hesitant both to expand payrolls and to lay off workers. Concern about stagflation-like conditions persists, with many participants pointing to growing downside risks to employment as job gains slow and the unemployment rate edges higher.
The debate over how restrictive policy truly is underpins much of the disagreement. Some officials argued that rates would remain restrictive even after the October cut; others pointed to strong economic activity and supportive financial conditions as signs that policy may not be sufficiently tight.
As a result, several officials who backed the October cut do not see another move in December as warranted, while others believe a second cut would be appropriate. Many participants suggested keeping rates unchanged for the rest of 2025 under their current outlooks.
On the balance sheet, the minutes confirmed plans to end quantitative tightening on December 1, shifting toward maintaining the portfolio. Some policymakers expressed support for reallocating reinvestments toward Treasuries rather than mortgage-backed securities to better align with the broader Treasury market.