Fed Prioritizes Inflation Control Over Stimulus, Delays Rate Cuts

JPMorgan Chase & Co. has withdrawn its prediction of a December Federal Reserve rate cut, aligning with a broader market reassessment of monetary policy as economic data and central bank signals suggest a more cautious path. The move reflects growing uncertainty over the Fed's timeline for easing, with traders now pricing in less than a 50% chance of a rate reduction at the December 10 meeting, down from over 60% in late October. This shift has rippled through financial markets, dampening precious metals and cryptocurrencies while amplifying scrutiny of the Fed's balancing act between inflation control and labor market concerns.

The Fed's next scheduled rate decision on December 10 remains a focal point, but officials have signaled a preference for waiting on clearer economic signals before acting. Recent data, including a two-month high in U.S. unemployment claims, has fueled some optimism for a December cut but has been tempered by Fed officials' warnings about the risks of premature action. "The economic trade-offs justify a gradual approach," said Fed Vice Chair Philip Jefferson in a recent statement, emphasizing the need to avoid overreacting to transitory labor market weakness. This stance has reinforced market expectations that any rate cuts in 2025 will be limited to one or two 25-basis-point reductions, with more aggressive easing likely delayed until 2026.

The pullback in rate-cut expectations has already impacted asset prices. Gold futures fell for a fourth consecutive session as traders scaled back bets on Fed accommodation, closing at $4,061.30/oz., down 3.4% over four days. Similarly, Bitcoin slid below $90,000 on November 18-the lowest since April 2025-as crypto markets grappled with macroeconomic uncertainty and a lack of clear catalysts. Analysts attribute the broader selloff to a "risk-off" environment, with investors recalibrating for a prolonged period of elevated interest rates.

The Fed's October 28-29 meeting minutes, set for release on November 19, could provide further clarity. While some officials have advocated for rate cuts, internal divisions persist, particularly around the durability of inflation and the health of the labor market. Fed Governor Christopher Waller recently argued that underlying inflation is near the 2% target and that the labor market remains "near stall speed," bolstering the case for caution. Conversely, political pressures and potential structural shifts in the economy could force the Fed to accelerate easing in 2026 according to analysts.

For now, markets are bracing for a prolonged period of high rates, with fixed-income markets pricing in a gradual decline toward 3% by mid-2026. JPMorgan's revised stance underscores this recalibration, reflecting the Fed's prioritization of inflation control over immediate economic stimulus.