with inflation above the Fed’s 2% target and a falling employment outlook, Fed Chair Jerome Powell said after the meeting that “there are simply people who have strong opinions” about which of the two risks needs more attention from a monetary policy standpoint.
“It’s not the normal situation where everyone agrees on the direction and what needs to be done,” he said.
The 9-3 decision in favor of the rate cut reflected “pretty broad support” among central bankers, Powell said, and put the Fed in a position to “wait and see” how the economy develops.
Fed projections indicate that the two hardline dissidents — Kansas City Fed President Jeffrey Schmid and Chicago Fed President Austan Goolsbee — were not alone, whether accompanied by the seven non-voting presidents or voters who swallowed their skepticism about the rate cut to support Powell and the majority. Six of the 19 monetary policymakers set the appropriate rate for the end of 2025 at 3.9%, above where the rate cut left it.
For next year, monetary leaders are even more divided about where rates should go, since several do not see any cuts as appropriate and others are more in favor of one, two or more.
Since the decision, a series of releases of official economic data that had been delayed by the government shutdown have tended to favor supporters of monetary easing, although economists say the reports had so much missing and imputed data that they warrant a lot of skepticism.
For example, the consumer price index rose 2.7% in November compared to the previous year, but most of the data came from prices collected in the second half of the month, after the Administration reopened, and when retailers offered discounts for the Christmas season.
Another report showed the unemployment rate rose 4.6%, but it was obtained using an unusual methodology because the lockdown had prevented regular data collection.
