By Steven K. Beckner
(MaceNews) – As they moved closer to the final monetary policy meeting of 2025. a number of Federal Reserve officials have given varying degrees of support for lower interest rates but have remained mostly vague about whether the Fed should cut rates again as soon as next month.
After the Fed’s policymaking Federal Open Market Committee cut the federal funds rate for a second straight meeting on Oct. 29, Chair Jerome Powell said a third reduction in the policy rate at the FOMC’s Dec. 9-10 rate cut is “not a foregone conclusion” because of “strongly differing views about how to proceed in December.”
Powell’s assertion was borne out last week when an array of officials diverged on whether the FOMC should deliver another rate reduction before year’s end. And the pattern continued this week.
Some officials have lately taken a stand against further monetary easing – at least for the time being. Others have shown more openness to further monetary easing.
Most recently, on Wednesday, Fed Governor Stephen Miran reiterated his strongly held view that interest rates need to go lower, contending that official inflation statistics are misleadingly high.
By contrast, Boston Federal Reserve Bank President Susan Collins, who voted for the September and October rate cuts to support the labor market, said she now believes the FOMC should refrain from further rate cuts until the inflation picture becomes clearer.
Atlanta Fed President Raphael Bostic is not a voter, but he strongly suggested he will argue against a December rate cut, downplaying labor market softness and emphasizing inflation threats.
For a second straight meeting, the FOMC cut the funds rate by 25 basis points on Oct. 29 to a target range of 3.75% to 4.0%. Strangely, the two dissents went in opposite directions, with Miran favoring a 50 basis point cut while Kansas City Fed President Jeffrey Schmid preferred to leave rates unchanged.
At the same time, the FOMC brought its rate policy into better alignment with its balance sheet strategy by announcing the pending discontinuation of “quantitative tightening:” “Effective December 1, the Fed will keep the size of its balance sheet unchanged and reinvest all maturing agency securities into Treasury bills, thereby gradually increasing the share of Treasury securities in its portfolio and shortening its maturity.”
The FOMC had previously lowered the policy rate by 25 basis points on Sept. 17 to a target range of 4.0% to 4.25% — after standing pat all year following 100 basis points of easing in the final three months of 2024.
In its September Summary of Economic Projections, the 19 FOMC participants projected another 25 basis points of monetary easing will be done at the Committee’s last meeting of 2025. But Powell left that in doubt in his Oct. 29 press conference, saying a December 10 rate cut is “not a foregone conclusion, in fact, far from it.”
Those “strongly differing views about how to proceed in December” Powell referred to have been on full display this week.
On Wednesday, Miran,who has been pushing for aggressive monetary easing ever since he was appointed to fill a vacancy on the Board of Governors in September, asserted again that
“Fed policy is too restrictive.”
President Trump’s on-leave Council of Economic Advisors chair, contended that inflation looks elevated primarily because of past increases in shelter prices that are due to decline and because of “phantom inflation” measures, such as increases in investment management fees generated by the record run-up in stock prices.
Keeping monetary policy “so tight” on the basis of such statistical “artifacts” is “kind of nutty,” Miran said at a Cambridge University conference.
Collins, notably, took a more hawkish turn in her comments Wednesday, after previously backing rate cuts.
She said she voted for the last two rate cuts because “with downside risks to employment increasing relative to the upside risks to inflation this past summer, I decided that dialing the restrictiveness of our policy stance down another notch was prudent because it provides a bit more support to the employment side of our mandate.”
But now, with risks inflation still to the upside, “it will likely be appropriate to keep policy rates at the current level for some time to balance the inflation and employment risks in this highly uncertain environment,” she told a Regional & Community Bankers Conference at the Boston Fed.
Collins cited “several reasons to have a relatively high bar for additional easing in the near term.”
“Although monetary policy is still mildly restrictive, broad financial conditions are a tailwind, not a headwind, for economic growth,” she explained. “Given this tailwind, economic activity has been holding up quite well, with both household and business demand remaining resilient overall.”
“Against this backdrop, providing additional monetary support to economic activity runs the risk of slowing – or possibly even stalling – the return of inflation to target,” she continued. “And with resilient demand, the downside risks to employment, while present, do not seem to have increased further since the summer.”
“Absent evidence of a notable labor market deterioration, I would be hesitant to ease policy further, especially given the limited information on inflation due to the government shutdown,” Collins went on. “Until we can assess some of the effects of the cumulative policy easing since September, it seems prudent to ensure that inflation is durably on a trajectory back to 2 percent before making any further adjustments to our policy stance.”
She added that “the current level of policy rates, in my view, leaves policy well positioned to address a range of potential outcomes and balance risks on both sides of our mandate.”
Bostic, meanwhile, was even less dovish than he’s been in the past.
Never a strong proponent of rate cuts, he said he “(does) not view a severe labor market downturn as the most likely near-term outcome” and instead “view(s) price stability as the more urgent priority.”
Indeed, Bostic warned that “reductions in interest rates that normally would mitigate risks to the employment mandate could heighten the risks to the price stability mandate.”
Bostic, who will be retiring at the end of February, told the Atlanta Economics Club he sees “few compelling signs of a cyclical downturn.”
Nor does he see much to worry about in the labor market.”If we were experiencing broad-based cyclical labor market weakness, I would expect to also see signs of broader economic softening.
That’s not showing up on my radar.”
“I don’t read the available indicators from recent months as a clear signal that the labor market is weak,” Bostic added.
But with regard to inflation, he sees “little to suggest that price pressures will
dissipate before mid- to late 2026, at the earliest…” On the contrary, he said “evidence … points decisively in one direction—continued upward pressure on costs and prices.”
So, Bostic made clear he will be a voice against further rate cuts in December, warning, “If inflationary forces lurk for many months to come, I am concerned that the public and price setters will eventually doubt that the FOMC will achieve the inflation target.”
Official comments from earlier this week also left the outcome of the Dec. 9-10 FOMC meeting up in the air.
New York Fed President John Williams suggested an openness to further easing in much the same way he had done leading up to the late October FOMC meeting – by emphasizing employment worries over inflation fears.
“[I]t’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,” the FOMC vice chairman said in a Financial Times interview released Monday.
Williams did not directly point to a Dec. 10 rate cut but appeared to lean that way by adding that “inflation expectations have remained very well anchored,” while at the same time the labor market has “if anything, I think has cooled quite a bit, and is not adding to inflation.”
San Francisco Fed President Mary Daly was also unclear about timing as she talked about the general appropriateness of lower rates Monday.
“The U.S. economy has remained remarkably resilient this year, navigating uncertainty, changes in government policy, including tariffs, immigration, deregulation, and taxes, an AI-driven technology surge, and modestly restrictive monetary policy,” she wrote in a blog post published by her Bank. “At the same time, inflation, subtracting the impact of tariffs on goods prices, has gradually declined, although it remains elevated.”
Daly said, “this is all good news,” but said, ““the balance of risks has clearly shifted, as the labor market has rapidly softened and inflation has risen less than many projected earlier in the year.”
Daly said the September and October rate “adjustments” were meant to “provide needed insurance for the labor market, while maintaining a modestly restrictive policy stance to further reduce inflation.”
After rhetorically asking whether more will be needed, she said the answer depends largely on labor market conditions in her mind and concluded that the behavior of labor compensation shows job numbers are softening primarily because of weaker demand for labor, not just due to supply factors like reduced illegal immigration.
“Wage movements reveal the answer,” Daly wrote. “Nominal and real wage growth have slowed overall as the labor market has cooled, even in many sectors where foreign-born workers were a larger share of employment. If the slowing in payroll employment growth was mostly structural, related to labor supply, the opposite would be true…”
“The bottom line: We are likely experiencing a negative demand shock. Demand for workers has fallen — it just happened to be met with a nearly coincident decline in the labor supply.’ she added.
At the same time, Daly suggested moderating inflation gives the Fed room to focus more on counteracting this weaker labor demand.
“Restrictive monetary policy is putting downward pressure on inflation, a cyclical phenomenon…,” she said. “(U)nlike what many projected, trade rebalancing has not led to more broad-based and persistent inflation dynamics. Indeed, so far, the effects of the tariffs have largely been confined to goods, with little spillover into services inflation or inflation expectations, which remain relatively well- anchored around our target.”
Daly added a caveat that the Fed mustn’t repeat the mistake of the 1970s and focus so much on stimulating employment that it allows inflation to erupt. “Getting policy right will require an open mind and digging for evidence on both sides of the debate,” she cautioned.