Several regional Fed presidents express cautious stance on excessive rate cuts, US dollar index rises for the third consecutive day.

Several regional Federal Reserve presidents publicly expressed dissatisfaction with the interest rate cut decision this week, highlighting the growing internal disagreements within the Fed about the future path of interest rates. Multiple officials stated that the current US labor market remains strong and inflation levels are elevated, so there was no need for a 25 basis point rate cut this week, nor do they support further policy easing at the December meeting. Dallas Fed President Kaplan said she "did not see the need for a rate cut this week" unless there is a significant drop in inflation or a significant cooling of the labor market in the future. Cleveland Fed President Mester also criticized this week's rate cut, stating that the current interest rates are "almost at a neutral level" and further cuts would diminish the Fed's policy effectiveness in bringing inflation back to the 2% target. Fed Chairman Powell issued a rare explicit warning to the market after Wednesday's monetary policy meeting, saying that a December rate cut is "certainly not a done deal" and pointing out "clear divisions" within the decision-making body. The market had almost fully priced in another rate cut in December, but expectations quickly cooled after Powell's comments, although traders still believe that the probability of a rate cut is higher than no rate cut. Atlanta Fed President Bostic said that Powell must show the market the significant differences in opinions within the Fed to avoid misjudging the interest rate path. He also expressed concern that even though he ultimately supported this week's rate cut, he is uneasy about policy rates getting closer to the neutral range as it could weaken the Fed's inflation-fighting efforts. Kansas City Fed President George criticized that the current US economy still has momentum, the job market is "fundamentally balanced," and any pressures in the labor market are more from technological changes and demographic shifts rather than a cooling demand. Therefore, rate cuts have limited impact on job improvement but could harm the Fed's credibility in achieving the 2% inflation target. With the US government shutdown exceeding 30 days, official economic data releases halted, forcing Fed policymakers to rely on business surveys and feedback to assess the economic conditions, further amplifying internal uncertainties. Many officials admitted that this will make future policy discussions more difficult and indicate that the December monetary policy meeting's debate could be much more intense than market expectations. Amid increased policy uncertainty and the revaluation of the Fed's path by financial markets, the US dollar index rose for a third consecutive day, with a cumulative increase of 1.6% this month, making it the second strongest monthly performance of the year. The strength of the dollar was driven not only by Powell's comments dampening rate cut expectations but also by the economic and fiscal pressures facing other major economies. The euro fell to a two-month low due to France's credit rating downgrade, the pound was under pressure due to the worsening UK fiscal deficit, and the yen weakened as markets expected Japan to implement a larger stimulus package. The US government shutdown, which led to a lack of economic data, also made the US dollar a safe-haven asset. Institutional analysis suggests that the lack of official data releases "makes investors bet on the resilience of the US economy" and keeps the dollar strong in the short term. Some institutions that were bearish on the dollar have also begun to shift their stance. Morgan Stanley announced this week that they are cancelling their recommendation to short the dollar, citing the resilience of US economic growth and the market's reassessment of the final rate decision by the Fed. Against the backdrop of global currencies weakening against the dollar, several investment banks predict that the strength of the dollar may continue until the end of the year or even the beginning of 2026, and the options market also shows a bullish sentiment towards the dollar. Some hedge funds are re-betting on the dollar to rise further, while Asian currencies have generally weakened this month, with the Korean won and Japanese yen leading the decline.