Three senior executives expressed concerns in one day, making a Fed rate cut in December increasingly difficult.

Three senior executives expressed concerns in one day, making a Fed rate cut in December increasingly difficult.

Divisions within the Federal Reserve have intensified, as three senior officials expressed concerns about inflation on the same day, making the prospects for a December rate cut even more uncertain.

On Thursday, Federal Reserve Governor Michael Barr stated that since the inflation rate continues to hover around 3%, still some distance from the 2% target, the Fed needs to act cautiously when considering further rate cuts.

Although Barr did not explicitly oppose rate cuts, his concerns about inflation will make decision-making more complicated. According to futures contract pricing, investors currently estimate the likelihood of a December rate cut at around 40%.

Almost simultaneously, Cleveland Fed President Beth Hammack reiterated her opposition to further rate cuts, and Chicago Fed President Austan Goolsbee also expressed anxiety about a December rate cut.

Governor Barr Shifts to a Cautious Stance

As a Federal Reserve Governor, Michael Barr’s position is crucial. He had previously supported rate cuts in September and October but has not made a clear statement regarding actions in December.

Given that several other colleagues have already made their support or opposition to a third rate cut public, Barr’s vote could prove decisive.

On Thursday, Barr made his concerns clear. He stated:

I’m concerned that the inflation rate we’re seeing is still hovering around 3%, while our target is 2%, and we are committed to achieving that goal.

He emphasized:

Therefore, we need to be careful and cautious in our monetary policy because we want to make sure we achieve both sides of our dual mandate.

Although Barr did not directly declare opposition to another rate cut, his unease about stagnant inflation will undoubtedly complicate Powell’s efforts to build consensus before the December meeting.

The September jobs report released on Thursday by the US Bureau of Labor Statistics presented a complex picture: Employers added a net 119,000 jobs, the best performance since April, but August’s data was revised downward and the unemployment rate edged up to 4.4%.

After the data was released, Barr indicated that he believes the labor market has “cooled somewhat,” and that the pace of job creation is close to the so-called balanced level that maintains a stable unemployment rate.

Hammack Warns of Financial Stability Risks

Compared to Barr’s caution, Cleveland Fed President Beth Hammack holds a firmer stance.

On Thursday, she reiterated her opposition to further rate cuts and believes doing so could threaten financial stability.

Hammack pointed out that high inflation is “still a real problem” for the US economy and is “moving in the wrong direction.” She warned:

Lowering interest rates to support the labor market could prolong the period of high inflation and may also encourage risk-taking in financial markets.

Hammack stated:

This means that the next economic recession could be larger than it otherwise would be and would have a bigger impact on the economy.

Regarding the latest non-farm payroll data, Hammack called it “outdated” and believes it highlights the challenges the FOMC faces in monetary policy. Hammack will become an FOMC voting member in 2026.

As an FOMC voting member this year, Chicago Fed President Austan Goolsbee also expressed concerns over a December rate cut.

At an event in Indianapolis, he said he feels “a bit uneasy” about another rate cut. Goolsbee pointed out:

Inflation seems to have stalled and has even signaled a warning that it could be moving in the wrong direction.

This sense of stagnation makes him uneasy, and he hinted that he may not be inclined to support further easing of monetary policy if the inflation outlook does not improve.

Goolsbee is an FOMC voting member this year.

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