Renovations continue at the Federal Reserve Board building in Washington, D.C., U.S., November 14, 2025. REUTERS/Elizabeth Frantz

By Howard Schneider

WASHINGTON (Reuters) -A divided Federal Reserve cut interest rates last month even as policymakers cautioned that doing so could risk entrenched inflation and a loss of public trust in the U.S. central bank, the minutes from its October 28-29 meeting showed on Wednesday.

The account of that meeting added to growing doubts that the Fed would deliver another reduction in borrowing costs at its December 9-10 gathering, with traders now giving that scenario only about a one-in-four chance.

"Many participants were in favor of lowering the target range for the federal funds rate," the minutes stated, while noting some members of that group also would have been satisfied if the policy-setting Federal Open Market Committee had left rates steady.

Several others opposed the rate cut outright, and "expressed concern that progress toward the Committee's 2% inflation objective had stalled ... while also noting that longer-term inflation expectations could rise should inflation not return to 2% in a timely manner."

"Most participants," however, noted that ... further policy rate reductions could add to the risk of higher inflation becoming entrenched or could be misinterpreted as implying a lack of policymaker commitment to the 2% inflation objective," the minutes added.

That language reflected the emerging split within the Fed over whether potential weakness in the job market should take priority over the fact that inflation has been above the central bank's target for four and a half years, has not moved much lately, and is expected to improve only slowly next year.

While the minutes suggest a large number of the Fed's 19 policymakers did not support a rate cut next month, it does not give any indication of how close the split was among the committee's 12 voting members, an important consideration with the next meeting just three weeks away and the flow of potentially clarifying government data still not fully restored from the recent government shutdown.

Under the revised release schedule announced by the Bureau of Labor Statistics on Wednesday, the Fed will not get updated jobs data for October or November before next month's meeting, though the delayed report for September is due out on Thursday.

There has been no announcement of the schedule for updated inflation data.

Analysts said the minutes highlighted the divisions Fed Chair Jerome Powell will have to mediate without the touchstone data reports typically at the center of the central bank's policy debates.

"The FOMC remains far more divided than usual on the next steps for policy," Oliver Allen, senior U.S. economist at Pantheon Macroeconomics, wrote in an analysis of the minutes. "Caution will be reinforced by today's announcement from the BLS" on the release schedule.

U.S. stocks pared gains slightly after the release of the minutes. Yields on U.S. Treasuries were higher on the day.

Shortly before the release of the minutes, President Donald Trump repeated his criticism of Powell's stewardship of the central bank, saying he'd "love to fire his ass" for not cutting rates faster.

FED POLICYMAKERS SPLIT THREE WAYS

The FOMC voted 10-2 at last month's meeting to cut the central bank's benchmark interest rate by a quarter of a percentage point to the 3.75%-4.00% range, with the two dissents unusually split in favor of both tighter and looser monetary policy.

The minutes suggested a spirited search for compromise as officials grappled with the lack of data during the shutdown, weighed risks of rising inflation against the risks of a weakening job market, and even cautioned against the possibility of a "disorderly fall in equity prices" if there was an "abrupt reassessment" of investments in artificial intelligence.

Powell said in unusually blunt terms in his press conference on October 29 that a rate cut at the December meeting was not a "foregone conclusion."

"There's a growing chorus now of feeling like maybe this is where we should at least wait a cycle" before considering another rate cut, Powell told reporters.

The "chorus" was described in the minutes, with policymakers separated into three different groups, none a clear majority, in their discussion of the December meeting.

"Several" participants saw a December reduction as likely appropriate; several others saw lower rates as eventually appropriate though not necessarily as of December; "many participants" had already ruled out a December cut. "Many" is greater than "several" in Fed parlance, but both are short of the "most" reference that indicates a majority.

With official data releases still lagging during the shutdown, officials will be left evaluating alternative information and leaning more heavily on their discussions with business executives and other contacts.

"Many participants agreed that the Committee should be deliberate in its policy decisions against the backdrop of ... two-sided risks and reduced availability of key economic data," the minutes said.

In his post-meeting conference last month, Powell said that while policymakers could get a good feel for the economy from available public and private sources, the absence of the official jobless and inflation numbers could slow the Fed's pace.

"In terms of how it might affect December, it's really hard to say," Powell said. "We just don't know what we're going to get. If there is a very high level of uncertainty, then that could be an argument in favor of caution."

(Reporting by Howard Schneider; Additional reporting by Ann Saphir; Editing by Paul Simao)