If it's possible for a central bank to cut rates and still be hawkish, the U.S. Federal Reserve accomplished that this week.

In his post-meeting press conference Wednesday, Fed Chairman Jerome Powell hit markets with an unexpected broadside, insisting that a December rate cut was far from a done deal. The reaction was swift, with crypto and U.S. stocks tumbling Wednesday afternoon and all day Thursday.

There was also the vote to cut rates. A chummy group, members of the FOMC typically vote in unanimity on policy. The Wednesday decision, however featured a dissent from Kansas City Fed President Jeff Schmid, who voted to hold policy steady. (There was also a dissent from Fed Governor Stephen Miran, who voted to cut rates by 50 basis points instead of 25. A recent appointee by President Trump to the Fed, Miran's dissent was no surprise as he had done the same at the Fed's previous meeting).

Inflation still too high

In a short essay Friday explaining his vote not to cut rates, Schmid questioned the Fed's need to ease conditions, noting stocks at all time highs, narrow corporate bond spreads and strong levels of high-yield bond issuance.

Inflation, he reminded, has remained above the Fed's 2% target for years and has stopped coming down. "I take small comfort in most measures of inflation expectations having not moved up," he said.

But what of deteriorating labor market conditions? Schmid suggested there's not a lot the Fed can do about that, blaming "structural changes in technology and demographics."

Markets slip

In the middle of a decent bounce following yesterday's tantrum, markets Friday morning pulled back just a bit in response to Schmid's comments, with bitcoin slipping back under $110,000 and Nasdaq futures now higher by just 1.3% versus 1.7% earlier.

Rate traders are now pricing in just a 66% chance of a rate cut at the Fed's December meeting versus 73% yesterday and nearly 95% prior to Powell's and Schmid's Wednesday surprise.