Federal Reserve Officials Oppose December Interest Rate Cuts

Two Federal Reserve officials, Susan Collins and Raphael Bostic, have expressed opposition to further interest rate cuts at the Fed's upcoming meeting in December. This marks a shift in the Fed's outlook, which previously anticipated a third consecutive cut following reductions in September and October.

Collins, the president of the Federal Reserve Bank of Boston, highlighted that inflation remains stubbornly high, consistently exceeding the Fed's 2% target for nearly five years. She noted that while the job market is experiencing weak hiring, layoffs have not surged, suggesting the economy does not currently require additional rate cuts.

Bostic, president of the Atlanta Fed, echoed this sentiment, emphasizing concerns over elevated inflation and advocating for stability in the funds rate until there is clear evidence of inflation trending back toward the target.

Both officials pointed to the ongoing government shutdown as a complicating factor, which has led to a lack of essential economic data needed to guide monetary policy decisions. Collins mentioned that the absence of critical reports, including jobs and inflation data for October, complicates the Fed's ability to formulate an economic outlook.

This uncertainty has made it increasingly challenging for the Fed to decide on future rate changes. Collins stated, 'It will likely be appropriate to keep policy rates at the current level for some time in this highly uncertain environment.' This stance contrasts her previous position from October, where she supported an additional rate cut.

Bostic also noted that surveys of businesses indicate many companies plan to raise prices in the coming year, reinforcing concerns that inflation may not decline as anticipated. While some Fed officials, like Governor Stephen Miran, argue that recent tariff impacts on prices will be temporary, the overarching sentiment among these two officials remains cautious.

David Seif, chief economist at Nomura Securities, predicted that the Fed would not cut rates in December and anticipated that any further reductions would not occur until March. The Fed's decision-making process is complicated by the dual pressures of weak labor market indicators and persistent inflationary pressures.

As Collins stated, 'Absent evidence of a notable labor market deterioration, I would be hesitant to ease policy further, especially given the limited information on inflation due to the government shutdown.' Overall, the current discourse within the Federal Reserve reflects a careful balancing act between stimulating economic growth and controlling inflation.