US Fed Divided Over December Rate Cut... Monetary Policy Direction Remains Uncertain

Concerns Over Inflation vs. Responding to Economic Slowdown... Diverging Views Among Committee Members
Goolsbee and Cook Remain Cautious About a December Cut
Daly Stresses Flexibility... Myron Calls for Aggressive Easing

Members of the United States Federal Reserve are showing divergent views regarding the future direction of monetary policy. Last month, Federal Reserve Chair Jerome Powell took a cautious stance on the possibility of a rate cut in December. As disagreements among committee members over the interest rate path have intensified, the outlook for future policy has become even more uncertain.

Austan Goolsbee, President of the Federal Reserve Bank of Chicago.

On November 3 (local time), Austan Goolsbee, President of the Federal Reserve Bank of Chicago, expressed caution about further rate cuts in an interview with Yahoo Finance, predicting that inflation could accelerate next year.

He stated, "I have not yet made a decision regarding the December meeting," and added, "I am concerned about the inflation aspect. For the past four and a half years, inflation has exceeded the target (2%) and is moving in the wrong direction."

At last month’s regular Federal Open Market Committee (FOMC) meeting, the Fed cut its benchmark interest rate by 0.25 percentage points for the second consecutive month, adjusting it to a range of 3.75-4.0% per year. President Goolsbee, who holds a voting right on rate decisions, supported the 0.25 percentage point cut at last month’s meeting, but has not yet decided on his position for the upcoming meeting in December.

Lisa Cook, a Fed Governor who is currently engaged in a legal battle after filing a lawsuit against President Donald Trump’s attempt to remove her, also judged that the risk of a slowdown in employment outweighs the risk of rising prices. However, she did not clarify her stance on a possible rate cut in December. At a Brookings Institution event, Governor Cook said, "Future policy is not on a predetermined path," and, "At this point, both sides of the dual mandate-price stability and full employment-present heightened risks. Every meeting, including the December meeting, is a 'live meeting.'" This means that the interest rate path will be determined based on economic indicators and discussions among committee members at the time of the meeting.

She also noted that while price increases due to tariff hikes are likely to be temporary, "the labor market can deteriorate very quickly. There could be nonlinear (unexpected and sharp) effects, so we are watching very carefully," leaving room to respond with a rate cut should employment conditions worsen.

Mary Daly, President of the Federal Reserve Bank of San Francisco.

There were also voices leaning toward a rate cut at the December meeting.

Mary Daly, President of the Federal Reserve Bank of San Francisco, said in a speech at the Palm Beach Forum Club that the recent two consecutive 0.25 percentage point rate cuts were "appropriate" and that the Fed should "keep an open mind" regarding additional cuts. While she mentioned the need to respond to both inflation and employment, she emphasized a more flexible approach to the possibility of further rate cuts within the year.

Stephen Myron, a Fed Governor who is known as President Trump’s "economic advisor," also advocated for a more aggressive rate cut.

In an interview with Bloomberg TV, Governor Myron said, "The Fed is being too restrictive, and the neutral (interest rate) level should be much lower than the current policy stance. I am more optimistic about inflation than some other members of the committee. Therefore, there is no reason to maintain a restrictive policy." He added, "If restrictive policy is prolonged, there is a high risk that monetary policy alone could trigger a recession."

Governor Myron has advocated for a 0.5 percentage point rate cut at every FOMC meeting since his first attendance in September.

With signs of a slowdown in the labor market continuing and the inflation rate still hovering in the high 2% range, the Fed faces the dilemma of having to achieve both price stability and full employment. As a result, internal debates over the future interest rate path are intensifying within the Fed. At the rate decision on October 29, two of the twelve FOMC members cast opposing votes, with one supporting a "0.5 percentage point cut" and another calling for a "hold," highlighting the growing divergence of opinions within the Fed regarding future monetary policy. Chair Powell also stated at a press conference on the same day, "We should not take a December rate cut for granted. In fact, we are far from that," and added, "There are strong differences of opinion among policymakers regarding the direction in December."