Federal Reserve Chair Jerome Powell poured cold water on hopes for a holiday rate cut, dialing back expectations as the labor market cools and inflation persists.

Powell said a December cut is far from guaranteed. Even as the central bank on Oct. 29 trimmed its benchmark federal funds rate to a range of 3.75% to 4%, anyone looking for certainty had to look elsewhere. An ongoing government shutdown means the Fed is missing key data, inflation remains stubbornly high and the labor market shows signs of cooling – all signs pointing to a murky road forward for Fed officials.

"What do you do if you're driving the fog? You slow down," Powell said regarding the lack of government data.

Powell’s description of strong disagreements among voting members about how to proceed in December further drove the point home.

“When we have tension between our two goals, we have strong views across the committee,” Powell said after the Fed's two-day October meeting. “A further reduction in the policy rate at the December meeting is not a foregone conclusion. Far from it.”

Responding to a question from a reporter, Powell added, "For some part of the committee, it's time to maybe take a step back and see whether there really are downside risks to the labor market or see whether in fact the growth, the stronger growth that we're seeing, is real."

Are more cuts on the way?

Powell reiterated there is “no risk-free" path for policy the Fed can take as the job market shows signs of slowing and inflation, now at 3%, remains above the Fed’s 2% target.

“If the two goals are sort of equally at risk, then you ought to be at neutral because one of them is calling for you to hike and one of them is calling for you to cut,” Powell said, describing Wednesday’s decision as another “risk management” cut.

Futures markets, which had strongly anticipated a rate cut after the Fed's meeting from Dec. 9 through Dec. 10, changed their tune after Powell’s press conference. As of Wednesday evening, they predict the Fed will hold rates steady.

Some economists also mellowed out their expectations for a rate cut at the end of the year, but not all of them.

Inflation isn’t looking quite as threatening as it did earlier this year, according to James Knightley, chief international economist at ING. Tariffs are taking time to show up in consumer prices, and lower energy costs, slower rent growth, and cooling wage growth are helping to mitigate inflation, he said in a note Oct. 29.

“We expect a December rate cut and while we retain a moderately upbeat outlook, think it will take at least two more rate cuts next year and further dollar weakness to achieve the required platform for growth,” Knightley added.

How will rate cuts affect consumers' wallets?

Lower rates can ease pressure on consumers by leading to reduced interest on credit cards, car loans, and mortgages, while also giving a boost to small businesses which are key drivers of job growth, according to Dimitri Silva, Reams Asset Management’s managing director and head of global rates and foreign exchange.

However, interest rate changes can take six months to a year before they filter through the economy, Silva said.

Rodney Williams, co-founder of SoLo Funds, a finance app that allows users to borrow and lend money, said the October quarter-point cut will provide little relief for Americans living paycheck to paycheck. He said he’s seen an increase in users requesting loans to pay for necessities like groceries, rent, and bills.

“Financially vulnerable households will feel little relief from rate cuts because they are still exposed to high interest on everyday credit,” Williams told USA TODAY. “While a quarter point rate cut can stimulate economic activity and job growth over time, the impact is not immediate for consumers who are desperate for a financial buffer.”

What does a rate cut mean for consumer savings?

As the Fed cuts rates, savers will start to see smaller returns on their cash.

While banks are sometimes slow to lower interest rates for borrowers, they are quicker to drop rates on savings accounts and certificates of deposit.

“Overall it is good for equities, and bad for savers and fixed income investors,” said Sean O’Hara, president of Pacer ETF Distributors.

Disagreement among the FOMC

The Fed’s Sept. 17 “dot plot” — a quarterly snapshot detailing where committee members expect interest rates to land — showed the median projection calling for two additional rate cuts before the end of 2025, implying a December cut.

But the September dot plot also revealed a wide range of views, with some officials expecting no further cuts while one projected a rate low enough to require 50-basis-point reductions in September, October, and December.

Two of the 12 Federal Open Market Committee voting members dissented from Wednesday's quarter percentage point cut decision. Fed Gov. Stephen Miran preferred a half percentage point cut and Kansas Fed President Jeffrey Schmid preferred to hold rates steady.

“Markets have grown accustomed to clear forward guidance and few surprises around Fed decisions, but that could change as we enter this new phase of monetary policy, especially once a new Fed Chair takes over in May,” said Isaac Wheeler, managing director of balance sheet strategy at Derivative Path.

This story was updated to more accurately reflect Sean O'Hara's title.

Reach Rachel Barber at rbarber@usatoday.com and follow her on X @rachelbarber_

This article originally appeared on USA TODAY: The Fed cut rates again, but officials disagree on what comes next. What it means for you

Reporting by Rachel Barber, USA TODAY / USA TODAY

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