The minutes of the Federal Reserve’s (Fed) monetary policy meeting of December 9 and 10, to be held this Tuesday, are expected to shed new light on disagreements among monetary policymakers over the decision to reduce short-term rates for the third consecutive time and signal a maintenance of short-term rates in 2026.
The Fed’s quarter-percentage-point cut in the monetary policy rate range, to 3.50-3.75%, generated three dissents: two from the central bank presidents, who considered that a cut was not necessary, and one from Fed Governor Stephen Miran, who, for the third time since joining the Fed in September, was the only advocate of a cut larger than half a percentage point.
With inflation above the Fed’s 2% target and the jobs outlook deteriorating, Fed Chair Jerome Powell declared after the meeting that “there are simply people with strong opinions” about which of the two risks requires more policy attention.
“It’s not a normal situation where everyone agrees on the direction and what to do,” he said. The 9-3 decision in favor of a rate cut reflected “pretty broad support” among central bankers, according to Powell, and put the Fed in a position to “wait and see” how the economy develops.
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Fed projections indicate that the two hardline dissidents — Kansas City Fed President Jeffrey Schmid and Chicago Fed President Austan Goolsbee — had company, either among the seven non-voting presidents or among voters who swallowed their skepticism about the rate cut to back Powell and the majority. Six of the 19 monetary policymakers forecast 3.9% as the appropriate interest rate by the end of 2025, above the level at which the rate cut left it.
For next year, policymakers are even more divided on the right direction for rates: several believe no cuts are appropriate, while others are more in favor of one, two or more.
Since the decision, several official economic releases, delayed by the government shutdown, have tended to favor moderates, although economists say the reports contained so much missing and imputed data that they warrant widespread skepticism.
The consumer price index rose 2.7% in November from a year earlier, for example, but most of the data came from prices collected in the second half of the month, after the government reopened and when retailers offered discounts for the holiday season.
An independent report showed the unemployment rate rose to 4.6%, but it was obtained using an unusual methodology because the lockdown prevented regular data collection.
The minutes will be published at 14:00 EST (19:00 GMT).
With information from Reuters
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