"Federal Reserve Mouthpiece": Three interest rate cuts won't resolve internal disputes; beware of "stagflation risk"

On December 11th, “Federal Reserve mouthpiece” Nick Timiraos published an article stating that the Federal Reserve officials are cutting interest rates for the third consecutive meeting. However, concerns about inflation and the employment market remain significant. There are unusual divisions within the Fed, and therefore, officials are not highly inclined to continue rate cuts. Recent public comments from Fed officials over the past few weeks show serious disagreements within the committee, and the final decision may depend on how Fed Chair Powell wishes to proceed. Powell’s term will end in May next year, meaning he will only preside over the next three rate-setting meetings. While price pressures remain strong, the cooling labor market presents the Fed with an unpleasant trade-off—an unprecedented situation in decades. During the so-called “stagflation” period of the 1970s, when officials faced a similar dilemma, the Fed’s stop-and-go approach allowed high inflation to become entrenched. UBS Chief U.S. Economist Jonathan Pingle said, “As interest rates approach a neutral level, each rate cut will cost you more support from participants. You need data to motivate those participants to join the majority in implementing rate cuts.” (Jin10)