Fed officials split over December rate cut as policy divide deepens

WASHINGTON: A growing divide within the Federal Reserve came into sharp focus on Friday, as several top officials openly questioned this week’s decision to cut interest rates, even while others argued that further easing was necessary to prevent deeper weakness in the labour market.

The disagreement has cast a shadow over Fed Chair Jerome Powell’s final months in office, with policymakers increasingly split over whether to continue reducing rates when the central bank meets again on December 9-10.

Differing views on next move

Dallas Fed President Lorie Logan was among those who pushed back against the latest rate cut, saying she saw “no need” for the move. Speaking at a banking conference, she said another reduction in December would be difficult to justify without clear signs of inflation easing faster than expected or the labour market cooling more quickly.

Cleveland Fed President Beth Hammack shared a similar stance, noting that monetary policy was already close to neutral. “I do think we need to maintain some amount of restriction to help bring inflation back down to target,” she said.

Both Logan and Hammack, who will gain voting rights next year, stressed the importance of holding steady until clearer economic signals emerge.

Waller pushes for further easing

In contrast, influential Fed Governor Christopher Waller, who holds a permanent vote and is seen as a potential successor to Powell, called for additional rate cuts to support employment.

“The biggest concern we have right now is the labour market,” Waller said in an interview with Fox Business Network. “We know inflation is going to come back down, so I’m still advocating that we cut policy rates in December because that’s what all the data is telling me to do.”

Waller dismissed concerns that recent tariffs imposed by President Donald Trump would reignite inflation, while Logan warned that services prices remained a concern.

Tensions over data and direction

The debate has been fuelled by a lack of fresh government data due to the ongoing shutdown. Powell recently cited this uncertainty as a reason for caution, but Logan and Waller both argued that private-sector data and Fed surveys still offer a clear view of economic conditions.

On Wednesday, the Fed voted 10-2 to cut its benchmark rate to a range of 3.75 to 4.00 percent. Powell later acknowledged the “strongly differing views” within the committee, warning that another cut in December was “far from a foregone conclusion.”

Atlanta Fed President Raphael Bostic, who reluctantly supported the latest cut, said it brought policy closer to neutral in ways that made him “uncomfortable.” Kansas City Fed President Jeffrey Schmid, one of the two dissenters, argued that labour market stress was likely due to structural shifts rather than weak demand.

With inflation still above the Fed’s 2 percent target, the debate over how far to go with rate cuts is expected to intensify in the coming weeks, leaving Powell with the difficult task of steering a divided central bank through his final stretch as chair.