Allies of Federal Reserve Chair Jerome Powell have laid the groundwork for him to push through an interest rate cut during the central bank's December 9-10 meeting, the Wall Street Journal's Nick Timiraos reported on Monday.

But the decision is likely to be contested in an increasingly divided rate-setting committee, especially as a lack of clear data points for October leave the Fed flying blind into its final meeting for the year.

Powell is likely to weigh two options, Timiraos said one involving an immediate rate cut before adopting a more cautious stance for further decisions, while the alternative is to hold rates steady and reassess in January.

Both options are likely to draw dissent from some committee members, although markets began increasingly pricing in the probability of a Fed rate cut next month. This came especially after New York Fed President John Williams said he supported a cut in December.

Williams said the Fed had reason to cut rates now and prevent further weakness in the labor market. A December rate cut is also in line with the agenda Powell set in August, with the Fed now having cut rates in two consecutive meetings.

But other Fed members have struck a far more cautious stance on a December cut, arguing that inflation risks still persist, while the labor market is still resilient enough to not warrant immediate easing.

Officials have also flagged caution over a lack of economic readings for October, due to a long-running government shutdown. Inflation and employment data for October was set to be the last clear economic signals the Fed would receive heading into December.

Markets are pricing in a 79.7% chance the Fed will cut rates by 25 basis points during its December 9-10 meeting, up sharply from a 49.8% chance seen last week, CME Fedwatch showed.

Source: Investing.com