Citing worries about inflation and signs of relative stability in the labor market after two U.S. interest rate cuts this year, a growing number of Federal Reserve policymakers are signaling reticence on further easing, helping push financial market-based odds of a reduction in borrowing costs in December to below 50%.

As if to underscore the knife-edge decision, San Francisco Fed President Mary Daly - until now a firm supporter of the Fed's rate cuts - said on Thursday any decision about four weeks ahead of the next policy meeting is "premature."

"I have an open mind, but I haven't made a final decision on what I think, and I'm looking forward to debating with my colleagues," Daly said during an event in Dublin, Ireland.

Minneapolis Fed President Neel Kashkari, who, like Daly, said just a couple months ago that he felt a third rate cut by the end of this year would be warranted, told Bloomberg News on Thursday that he had opposed last month's rate cut because of resilience in the economy, and is on the fence about December.

"We have inflation that's still too high, running at about 3%," he said in brief welcoming remarks earlier in the day at a conference hosted by his regional Fed bank. "Some sectors of the U.S. economy look like they're doing great. Some sectors of the labor market look like they're under pressure."

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Short-term interest rate futures, the best real-time gauge of financial market expectations for Fed policy, now reflect a 47% chance that the rate-setting Federal Open Market Committee will lower borrowing costs on December 10, when the Fed wraps up its last policy meeting of 2025. Earlier this week the contracts indicated a 67% likelihood of a cut.

COLLINS SAYS SHE IS HESITANT ON FURTHER EASING

A rate-cutting pause appears to be on the mind of Boston Fed President Susan Collins, who on Wednesday said she sees a "relatively high bar" for additional easing in the near term.

"Absent evidence of a notable labor market deterioration, I would be hesitant to ease policy further, especially given the limited information on inflation due to the government shutdown," Collins told a bankers conference in Boston, adding that the policy rate will likely need to stay on hold "for some time."

The unusually blunt remarks from Collins, who voted for both of the Fed's rate cuts this year, illustrate deepening divisions at the U.S. central bank and point to the lack of consensus around another reduction in borrowing costs. Fed Chair Jerome Powell flagged those challenges two weeks ago after the central bank cut its policy rate to the 3.75%-4.00% range.

Another rate cut at the December 9-10 policy meeting, he said, is "far from" assured, especially when the lack of official data means less visibility on the true state of the economy.

Source: Investing.com