WASHINGTON (AP) — A rate cut next month was all but certain, but it’s now more of a coin toss as Federal Reserve officials disagree sharply over the health of the economy and whether stubborn inflation or weak employment poses a greater threat.
in some speeches in the past weekSome policymakers are increasingly concerned about persistent inflation in the wake of the recession. “Affordability” concerns played a major role in the election earlier this month.
At the same time, another camp is more concerned about: little employment and the threat is A job market with “few jobs and few layoffs” The situation could worsen and lead to more layoffs.
The confusion on the Fed’s 19-member rate-setting committee reflects the high degree of uncertainty in the economic outlook driven by multiple factors, including tariffs, artificial intelligence, and changes in immigration and tax policy.
“This reflects a great deal of uncertainty,” said Luke Tilley, chief economist at M&T Bank. “It’s not at all surprising that opinions are so divided.”
If the Fed cuts interest rates less, borrowing costs may remain. household use And cars are getting more expensive. This contributes to the perception that more expensive home and car loans are becoming more widespread. According to a public opinion pollthat the cost of living is too high.
Some Fed watchers say there could be an unusually large number of dissenting voices at the December 9-10 meeting, regardless of whether the central bank cuts rates or not. Krishna Guha, an analyst at Evercore ISI, said a decision to cut interest rates could have as many as four to five dissenting opinions, while a decision to keep rates unchanged could have three dissenting opinions.
Four no votes would be highly unusual given the Fed’s history of seeking a deal. The last time the four officials spoke out against it was in 1992 under then-Chairman Alan Greenspan.
Fed Director Christopher Waller said Monday that critics of the central bank often accuse it of “groupthink” because many of the Fed’s decisions are unanimous.
“Those who are criticizing us for this, get ready,” Waller said in a speech in London on Monday. “You might meet a group you haven’t seen in a long time.”
The government shutdown exacerbated the differences between the two sides. Interruption of economic indicatorsThis is a special challenge for the Fed, which Chairman Jerome Powell often describes as “data-dependent.” The government’s last employment statistics were in August, and the inflation rate in September.
Employment statistics for September will finally be released Published on Thursdaythe number of jobs for the month is expected to increase slightly to 50,000, and the unemployment rate is expected to remain unchanged at a still low 4.3%.
For now, Wall Street investors see a 50-50 chance of a rate cut in December. According to CME FedWatchdown significantly from nearly 94% a month ago. This decline led to a decline in the stock market this week.
After cutting key interest rates for the first time this year in September, Fed policymakers have signaled they will cut them twice more in October and December.
However, after implementing the second round of cuts on October 29, Chairman Powell poured cold water Regarding the possibility of recuts, he said, “It’s not a foreseen conclusion, and it’s far from a conclusion.”
And last week’s speeches by a number of regional Fed officials further reduced the market probability of a December rate cut. “In conversations with stakeholders across New England, we are hearing concerns about rising prices,” Boston Fed President Susan Collins said in a statement.
Collins said keeping the Fed’s key interest rate at its current level of about 3.9% will help control inflation. He added that the economy is “holding up very well” even with current interest rates.
Several other regional presidents expressed similar concerns, including Rafael Bostic of the Atlanta Fed, Alberto Musallem of the St. Louis Fed, and Jeffrey Schmidt of the Kansas City Fed. Mr. Mussallem, Mr. Collins and Mr. Schmidt are among 12 officials voting on policy this year. Schmidt voted against it in October in favor of keeping interest rates on hold.
“When I talk to stakeholders in my district, I hear there is continued concern about the pace of price increases,” Schmidt said Friday. “Part of it has to do with the impact of tariffs on input prices, but it’s not just tariffs, or even primarily tariffs, that has people worried. We hear concerns about rising health costs and insurance costs, and we hear a lot about electricity.”
But Waller on Monday insisted that weak employment was a bigger concern and renewed his call for a rate cut next month.
“The labor market remains weak and is close to stalling,” he said. “Inflation through September continues to show a relatively small impact from tariffs, supporting the hypothesis that tariffs…are not a persistent source of inflation.”
Waller also dismissed concerns expressed by Schmidt and others that the Fed needs to keep raising interest rates because inflation has been above the Fed’s 2% target for five years. So far, Waller said, the public has not worried that inflation will remain high for an extended period of time.
“We can’t simply say we’ve exceeded our targets for five years, so we’re not going to cut back,” he added. “You have to give a better answer than that.”
Esther George, former president of the Kansas City Fed, said there could be consensus for a rate cut if new data from October and November, for example, shows the economy is losing jobs.
It’s also worth noting that many economists had expected multiple objections in September, but instead only Gov. Stephen Milan objected. appointed that month President Donald Trump voted against the rate cut decision and supported an even bigger rate cut.
“Registering a dissent is a difficult decision, and some of those speaking today may not follow through with a vote in that direction,” she said. “I think there will be enough agreement whichever direction they go.”
