:max_bytes(150000):strip_icc()/GettyImages-2243586904-29bb7f60ff9a48c9bae0be1c787f32f5.jpg "Why the Fed’s Next Interest Rate Move Is Becoming So Hard to Predict")
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Key Takeaways
- The Federal Reserve’s 12-member policy committee is divided about whether to cut interest rates at its next meeting in December.
- A group of “hawks” within the committee favors keeping rates higher for longer to fight inflation, while several “doves” want to cut rates sharply to boost hiring.
What should the Fed do to fight high inflation while preventing the job market from collapsing? Ask its 12 leaders and get 12 different answers.
It’s up in the air whether the Fed will lower its key interest rate for a third time in as many meetings in December. The chances of a rate cut were hovering around 50% Tuesday, according to the CME Group’s FedWatch tool, which forecasts rate movements based on fed funds futures trading data.
Traders aren’t sure how to feel about the next meeting because members of the policy committee themselves are sharply divided. Some believe the Fed should hold rates higher for longer to combat inflation, while others argue that the deteriorating labor market requires an immediate boost from lower rates.
What This Means For The Economy
The strongly differing opinions of the FOMC members reflect the economy’s dicey position caught between high inflation and slowing job creation.
The divide stems from the Fed’s dilemma: its dual mandate from Congress is to keep inflation low and employment high. Right now, both are heading in the wrong direction, according to recent data, pulling the Fed’s decision-making in opposite directions.
Here’s where each of the 12 voting members of the committee stands, according to recent public comments:
The Doves
Stephen Miran, Governor
Miran has stood out from his fellow FOMC members by consistently advocating for steep rate cuts, and contending that inflation will soon fall sharply. He repeated those arguments last week in an appearance on CNBC, where he said a cut of half a percentage point 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 favored additional rate cuts, regardless of what the highly anticipated and long-delayed Bureau of Labor Statistics jobs report for September says when it is released on Thursday.
“I am not worried about inflation accelerating or inflation expectations rising significantly,” he said Monday at an economic conference in London, according to prepared remarks. “My focus is on the labor market, and after months of weakening, it is unlikely that the September jobs report later this week or any other data in the next few weeks would change my view that another cut is in order. I worry that restrictive monetary policy is weighing on the economy, especially about how it is affecting lower-and middle-income consumers.”
Michelle Bowman, Governor
Bowman’s recent public comments have focused on banking supervision rather than monetary policy. Before that, however, she strongly advocated for steep and swift rate cuts.
“It is time for the committee to act decisively and proactively to address decreasing labor market dynamism and emerging signs of fragility,” she said in a speech in September following the FOMC’s decision to cut rates for the first time in 2025, according to prepared remarks. “We are at serious risk of already being behind the curve in addressing deteriorating labor market conditions.”
Bowman and Waller voted for a cut as early as July, dissenting against the majority.
The Hawks
Jeffrey Schmid, President of the Kansas City Fed
Schmid said he was against further rate cuts, contending that they would not help the labor market and would instead stoke inflation.
“I do not think further cuts in interest rates will do much to patch over any cracks in the labor market—stresses that more likely than not arise from structural changes in technology and immigration policy,” he said at an event in Denver last week.
Susan Collins, President of the Boston Fed
Collins said she favors keeping interest rates steady to combat inflation that remains above 2%.
“Absent evidence of a notable labor-market deterioration, I would be hesitant to ease policy further … it seems prudent to ensure that inflation is durably on a trajectory back to 2% before making any further adjustments to our policy stance,” she said at a banking conference in Boston last week, according to prepared remarks.
Somewhere Inbetween
Jerome Powell, Fed Chair
The most influential member of the FOMC, Fed Chair Jerome Powell, said an interest rate cut is “far from guaranteed” last month at a post-meeting press conference.
Powell noted the strong differing opinions among policymakers and emphasized the uncertainty the Fed is facing, given the lack of economic data due to the government shutdown.
“A further reduction in the policy rate at the December meeting is not a foregone conclusion—far from it,” he said. “Policy is not on a preset course.”
John C. Williams, President of the New York Fed
In recent public remarks, Williams did not commit to cutting rates and emphasized the need to maintain a balance between the Fed’s goals of keeping inflation low and employment high.
“It’s important to get inflation back to 2% on a sustained basis, but do it in a way that doesn’t unduly harm achievement of maximum employment,” he told The Financial Times on Nov. 10.
Michael S. Barr, Governor
The Fed needs to support the job market while getting inflation down to the target of a 2% annual rate, Barr said in an interview with Fed Communities.
“We made a lot of progress on that, but we still have some work to do,” he said.
Ha also noted the economy is currently working at two speeds: the wealthy are doing well, but people with lower incomes are falling behind. He also acknowledged that people are worried about the employment situation.
“We have to pay careful attention to making sure that the labor market is solid,” he said.
Lisa Cook, Governor
Cook said earlier this month she had not made up her mind about a rate cut in December.
“I determine my monetary policy stance each meeting based on the incoming data from a wide variety of sources, the evolution of my outlook, and the balance of risks,” she said in an interview with the Brookings Institution think tank in Washington. “Every meeting, including December’s, is a live meeting.”
Austan Goolsbee, President of the Chicago Fed
Goolsbee favors a cautious approach to additional rate cuts, especially given the Fed’s limited data due to the government shutdown, which he likened to driving in fog.
“When it’s foggy, let’s just 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 decision in October to cut rates because the labor market had shown signs of weakening, and that he favored a cautious approach going forward.
“The current policy stance is still somewhat restrictive, but we have moved it closer to its neutral level that neither restricts nor stimulates the economy,” he said in a speech at the Kansas City Fed. “The evolving balance of risks underscores the need to proceed slowly as we approach the neutral rate.”
Alberto Musalem, President of the St. Louis Fed
Musalem, speaking at a fireside chat event in Indiana, said the Fed should be cautious about further rate cuts and should “lean against” inflation.
“We need to proceed and tread with caution, because I think there’s limited room for further easing without monetary policy becoming overly accommodative,” he said.
