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📌 Main takeaway:
Key takeaways
- The Federal Reserve’s 12-member Monetary Policy Committee is divided on whether to cut interest rates at its next meeting in December.
- A group of “hawks” within the committee favor keeping interest rates higher for longer to fight inflation, while many “doves” want to cut interest rates sharply to boost employment.
So what should the Fed do to combat high inflation while preventing the labor market from collapsing? Ask its 12 leaders and get 12 different answers.
It is uncertain whether the Fed will cut its key interest rate for a third time in the same number of meetings in December. Chances of a rate cut were hovering around 50% on Tuesday, according to CME Group’s FedWatch tool, which forecasts interest rate movements based on federal funds futures trading data.
Traders are not sure how to feel about the upcoming meeting because the policy committee members themselves are sharply divided. Some believe the Fed should keep interest rates higher for longer to combat inflation, while others argue that a deteriorating labor market requires an immediate push from lower interest rates.
What does this mean for the economy
The sharply differing opinions of FOMC members reflect the economy’s precarious position between high inflation and slow job creation.
This division stems from the dilemma the Fed faces: its dual mandate from Congress is to keep inflation low and employment high. Currently, both are headed in the wrong direction, according to recent data, pulling the Fed’s decision-making process in opposite directions.
Here each of the 12 voting members of the committee stands, according to recent public comments:
Doves
Stephen Meiran, Governor
Miran has stood out from his fellow FOMC members by consistently calling for sharp interest rate cuts and claiming that inflation will fall sharply soon. He repeated those arguments last week in an appearance on CNBC, where he said a half-percentage-point cut would be “appropriate” in December, and that the Fed should cut it by “at least” a quarter-point.
Christopher Waller, Governor
Waller said he was more concerned about the health of the labor market than inflation, and that he favors additional interest rate cuts, regardless of what the long-awaited September jobs report from the Bureau of Labor Statistics says when it is released Thursday.
“I am not concerned about inflation accelerating or inflation expectations rising significantly,” he said on Monday at an economic conference in London, according to his prepared remarks. “My focus is on the labor market, and after months of weakness, the September jobs report later this week or any other data in the next few weeks is unlikely to change my view that another cut is in order. I am concerned that restrictive monetary policy is impacting the economy, especially with regard to how it impacts low- and middle-income consumers.
Michelle Bowman, Governor
Bowman’s recent public comments have focused on banking supervision rather than monetary policy. But before that, she strongly called for sharp and rapid interest rate cuts.
“It is time for the Committee to act decisively and proactively to address declining labor market dynamism and emerging signs of fragility,” she said in a September speech after the FOMC decided to cut interest rates for the first time in 2025. “We are in serious danger of being already behind the curve in addressing deteriorating labor market conditions.”
Bowman and Waller voted for the cut early in July, dissenting from the majority.
Falcons
Jeffrey Schmid, President of the Federal Reserve Bank of Kansas City
Schmid said he opposes further cuts in interest rates, arguing that this would not help the labor market but would instead lead to increased inflation.
“I don’t think further interest rate cuts will do much to patch up any cracks in the labor market — pressures that are more likely to arise from structural changes in technology and immigration policy,” he said at an event in Denver last week.
Susan Collins, President of the Federal Reserve Bank of Boston
Collins said she favors keeping interest rates steady to combat inflation, which remains above 2%.
“In the absence of evidence of a significant deterioration in the labor market, I would be reluctant to ease policy further,” she said at a banking conference in Boston last week, according to prepared remarks. “It seems prudent to ensure that inflation is on a sustainable path back to 2% before making any further adjustments to our policy stance.”
Somewhere in between
Jerome Powell, Chairman of the Federal Reserve
The FOMC’s most influential member, Fed Chairman Jerome Powell, said a rate cut was “far from guaranteed” last month in a post-meeting news conference.
Powell noted the strong differing opinions among policymakers and emphasized the uncertainty the Fed faces, given the lack of economic data due to the government shutdown.
“Further rate cuts at the December meeting are not a foregone conclusion – far from it,” he said. “Politics is not on a predetermined path.”
John C. Williams, President of the Federal Reserve Bank of New York
In his recent public statements, Williams did not commit to lowering interest rates and stressed the need to maintain a balance between the Fed’s goals of keeping inflation low and employment high.
“It is important to get inflation back to 2% on a sustainable basis, but to do so in a way that does not unduly harm the achievement of maximum employment,” he told the Financial Times on November 10.
Michael S. Barr, Governor
Barr said in an interview with Newsweek magazine that the Federal Reserve needs to support the labor market while reducing inflation to the 2% annual rate target. Federal societies.
“We have made a lot of progress in this regard, but we still have some work to do,” he added.
Ha also noted that the economy currently operates at two speeds: the wealthy are doing well, but lower-income people are falling behind. He also acknowledged that people are concerned about the employment situation.
“We have to pay careful attention to making sure the labor market is strong,” he said.
Lisa Cook, Governor
Cook said earlier this month that she had not decided whether to cut interest rates in December.
“I determine my position on monetary policy at each meeting based on data from a wide range of sources and the evolution of my expectations and the balance of risks,” she said in an interview with the Brookings Institution think tank in Washington. “Every meeting, including the December meeting, is a live meeting.”
Austin Goolsby, President of the Federal Reserve Bank of Chicago
Goolsby favors a cautious approach to additional interest rate cuts, especially in light of limited Fed data due to the government shutdown, which he likened to driving in fog.
“When it’s foggy, let’s be a little careful and slow down,” he said in an interview on CNBC earlier this month.
Philip Jefferson, Governor
Jefferson said he supported the October decision to cut interest rates because the labor market showed signs of weakness, and he favored a cautious approach going forward.
“The current policy stance remains somewhat restrictive, but we have brought it closer to its neutral level that neither constrains nor stimulates the economy,” he said in a speech at the Federal Reserve Bank of Kansas City. “The evolving balance of risks underscores the need to proceed slowly as we approach neutral.”
Alberto Muslim, President of the Federal Reserve Bank of St. Louis
Muslim, who was speaking during a friendly conversation in Indiana, said the Fed should be cautious about further interest rate cuts and should “count on” inflation.
“We need to move forward and tread carefully, because I think there is limited room for further easing without monetary policy becoming too accommodative,” he said.
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