On Wednesday, the Fed voted 9-3 to cut interest rates by 25 bps. Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeffrey Schmid dissented in favor of holding rates steady, while Fed Governor Stephen Miran voted for a 50 bps reduction.
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The risk of persistent inflation and the lack of data from the government shutdown was a major factor behind Goolsbee’s decision. “But I’ve just been uncomfortable front-loading too many rate cuts and assuming that what we’ve seen in inflation will be transitory,” Goolsbee told CNBC’s “Squawk Box” on Friday. He added that he is “optimistic” that rates will be a “fair bit lower” in 2026.
Schmid Argues Economy Still Strong, Inflation Too High
Schmid had a similar reason, saying that elevated inflation, paired with a healthy economy, calls for a modestly restrictive interest rate.
“Inflation remains too high, the economy shows continued momentum, and the labor market—though cooling—remains largely in balance,” wrote Schmid in a statement. Furthermore, he believes that the economy hasn’t changed much since the Fed voted to cut rates by 25 bps in October.
Core personal consumption expenditures (PCE), the Fed’s preferred gauge of inflation, was 2.8% in September, still above the Fed’s target of 2%.
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