「Fed Whisperer」: Three Rate Cuts Amid Internal Discord Difficult to Resolve, Caution Needed Against 'Stagflation Risk'

On December 11, "Fed Whisperer" Nick Timiraos reported in his latest article that Fed officials cut interest rates for the third straight meeting—but they remain split over whether to prioritize inflation or the labor market. Internal divisions at the Fed are unusually sharp, leading officials to hint at reluctance to keep cutting rates. Recent public comments from Fed policymakers have shown significant splits on the committee, meaning the final call could hinge on Fed Chair Powell’s preferred path. Powell’s term expires next May, so he will only lead three more rate-setting meetings. Persistent price pressures paired with a cooling labor market have put the Fed in an uncomfortable trade-off not seen in decades. During the 1970s stagflation period—when officials faced a similar dilemma—the Fed’s stop-and-start approach allowed high inflation to become entrenched. Jonathan Pingle, UBS’s Chief U.S. Economist, noted: “As rates near neutral, each cut loses more committee support—you need data to push those members to join the majority for a rate cut.” (Source: FXStreet)