Fed divisions deepen as policymakers split on inflation versus jobs.
Info via the Wall Street Journal, in brief:
The Federal Reserve’s once-united front on policy direction has fractured, with officials increasingly divided over whether stubborn inflation or a weakening labour market poses the greater threat to the economy — a split without much precedent under Chair Jerome Powell.
The rift has muddied the path for further interest-rate cuts that looked all but assured just weeks ago. While investors still see a December cut as slightly more likely than not, officials themselves appear deeply conflicted following two consecutive reductions that brought the federal funds rate down to a 3.75%–4% range.
When the Fed eased by a quarter-point in September, a slim majority of policymakers projected another two cuts by year-end. But a group of hawks pushed back hard after October’s follow-up move, questioning the need for further easing given resilient consumer spending and rising tariff-linked costs. The debate over the December meeting has become especially contentious, forcing Powell to publicly temper expectations at his last press conference in an effort to hold the committee together.
The month-long government shutdown has made matters worse, cutting off access to key economic data on jobs and inflation and allowing both sides to lean on selective anecdotes and private surveys to reinforce their views. Doves see mounting labour-market fragility but lack fresh data to bolster their case, while hawks argue inflation pressures could resurface if rate cuts continue unchecked.
Whether the Fed cuts again at its December 9–10 meeting remains uncertain. Some officials suggest a compromise — another small cut accompanied by guidance that future moves will require stronger evidence of economic weakness. Others say waiting until January would make little practical difference
