Fed Rate Cut Opposition Grows Within the Central Bank... December Cut Now Uncertain

The Financial News New York – By Lee Byung-chulDiverging views on the pace of interest rate cuts are emerging within the Federal Reserve System (Fed).
After the recent 0.25 percentage point rate cut, several regional Fed presidents voiced opposition, lending weight to Jerome Hayden Powell’s assertion that an additional cut in December is not a foregone conclusion. Market expectations for another rate cut this year are quickly fading.
According to the Financial Times (FT) on the 31st (local time), Lorie K. Logan, President of the Federal Reserve Bank of Dallas, and Beth Hammack, President of the Federal Reserve Bank of Cleveland, opposed the recent rate cut (to 3.75–4.00% annually) and publicly stated that rates should have been held steady.
President Hammack pointed out, “Inflationary pressures are evident across electricity bills, insurance premiums, and tariffs,” adding, “It was not appropriate to cut rates under the current circumstances.” President Logan also remarked, “Inflation remains high and the burden on households and businesses is significant,” and emphasized, “Unless there is evidence of a weakening labor market or lower prices, I cannot support another cut in December.”
Although both presidents do not have voting rights on the Federal Open Market Committee (FOMC), they aligned with Jeffrey Schmid, President of the Federal Reserve Bank of Kansas City, who voted against the recent decision. President Schmid cited rising medical costs and insurance premiums as reasons for his opposition.
Following its first rate cut of the year last month, the Fed has taken on a more hawkish tone after Jerome Hayden Powell stated that an additional cut in December is not guaranteed. While the unemployment rate has edged up to 4.3% and signs of a slowing labor market have appeared, some analysts attribute this to structural demographic and technological changes.
In fact, following Powell’s remarks, the market has sharply reduced the probability of another rate cut this year from 92% to 61%.
Christopher J. Waller, a Fed Governor, stressed the need for further cuts, saying, “When the fog is thick, you slow down but don’t stop.” However, Raphael Bostic, President of the Federal Reserve Bank of Atlanta, supported Powell, noting, “It is reasonable to adjust the pace in an environment of high uncertainty.”




pride@fnnews.com Lee Byung-chul Reporter