Powell faces the ultimate test: At least three dissenters at the December meeting, Federal Reserve consensus collapses!

"Federal Reserve mouthpiece" Nick Timiraos wrote that regardless of the outcome, the Federal Reserve's December meeting could see at least three dissenting votes—if the decision is to keep rates unchanged, the three governors appointed by Trump will vote against it; if the Fed cuts rates by 25 basis points, there will also be at least three dissenters.

In the absence of new economic data to guide complex decisions, Federal Reserve officials are facing a challenge: resolving disagreements over rate setting.

Federal Reserve Vice Chair Philip Jefferson on Monday illustrated the central bank's dilemma by acknowledging the risks of stubborn inflation and weak employment—two opposing threats that require opposite policy responses.

"The evolution of risk balance highlights the need for a gradual approach to rate cuts," Jefferson said in a speech at the Kansas City Fed.

Aside from this view, Jefferson's remarks neither supported a prolonged pause in rate cuts nor provided a basis for a rate cut at next month's meeting—a decision that is becoming unusually contentious.

As a member of the Fed's leadership, Jefferson typically reinforces Chairman Jerome Powell's views, and Powell is expected to play a key role in reconciling the divided policy-making committee next month.

In recent weeks, market expectations for a Fed rate cut at the December 9-10 meeting have steadily declined, which is rare during a period without major economic data releases.

According to CME Group data, early Monday trading showed the market-implied probability of a rate cut at about 45%, down from 60% a week ago and from 90% at the October 28-29 meeting.

On Monday, Jefferson reiterated his previous view: interest rates are currently at a "slightly restrictive" level, which will restrain economic growth, but recent rate cuts have brought rates closer to a neutral level that neither stimulates nor slows economic activity.

The Fed cut rates at its previous two meetings in September and October, but due to missing data from the recently ended federal government shutdown, growing divisions within the rate-setting committee have been difficult to resolve.

Several Fed officials who supported rate cuts at recent meetings said last week that unless there is evidence of labor market deterioration or improvement in inflation, they will oppose further rate cuts. It is currently unclear whether the Fed will obtain such data before its next meeting.

One faction is more concerned about inflation—which has been above the Fed's 2% target for four consecutive years. They worry that new price pressures from tariffs will keep inflation above target for the next two years, and are concerned that a stimulative, loose lending environment could pose risks if it takes six or seven years for inflation to return to target.

This faction has recently grown in size and now includes four regional Fed presidents who have monetary policy voting rights this year, as well as Fed Governor Michael Barr.

The other faction includes all three Fed governors appointed by Trump, who remain more concerned about the labor market. They believe their colleagues are overemphasizing the risks of persistently high inflation (which they see as remote), potentially triggering an unnecessary recession.

One of these governors, Christopher Waller, warned on Monday that recent private sector hiring data showed job growth in September and October was nearly "stalled," with some indicators pointing to further weakness in November.

For more than a year, companies have been slow to hire and reluctant to lay off workers, but Waller said Monday he is concerned that more companies are planning to downsize, which would disrupt this balance. "They're starting to talk about layoffs," Waller said.

He also pointed out that weak consumer confidence data, moderate wage growth, and sluggish demand for durable goods such as housing and cars all indicate that the economy still faces headwinds that may not be fully apparent, and could limit any acceleration in inflation.

As a result, Powell faces an almost impossible task: piecing together the usually broad consensus in the absence of consensus.