FED officials made different statements about the interest rate cut process and the current risks in the economy.
Minneapolis Fed President Neel Kashkari noted that rising electricity demand could raise average prices nationwide, saying, “If investment demand for data centers is very strong, that could push up interest rates.” Kashkari also added, “If the Fed significantly lowers interest rates, the economy could face a wave of high inflation.”
Kashkari added that monetary policy decisions will continue to be based on data and analysis, independent of political pressures.
Meanwhile, Fed Board Member Stephen Miran said the tension between the institution’s dual goals of maximum employment and price stability isn’t as great as some members believe. He reiterated his view that the Fed could continue to cut interest rates, citing the slowdown in population growth and the limited impact of President Donald Trump’s tariffs on inflation.
Miran opposed the 25 basis point rate cut decision made at last month’s meeting, arguing that a 50 basis point cut should be implemented instead. According to Miran, the Fed’s current policy stance is having a “very restrictive” impact on the US economy and needs to be counterbalanced with rapid rate cuts.
But many other Fed officials believe it’s important to be cautious about inflation risks. Some say tariffs could put lasting pressure on prices, while others point out that inflation has been running above target for years.
These differences in opinion complicate the Fed’s policy decisions, especially at a time when signs of a slowdown in the labor market are increasing. Chairman Jerome Powell stated that last month’s interest rate cut was for “risk management” purposes and was seen as a step to support the labor market.
Furthermore, the extension of the federal government shutdown could further complicate policy calculations at the Fed’s October 28-29 meeting. Much economic data is unavailable due to the shutdown, creating a lack of information about the key indicators that guide the Fed’s decisions.
*This is not investment advice.