Background on Key Figures and Their Roles
The Federal Reserve (Fed), the central bank of the United States, is currently facing a challenge due to differing opinions among its policymakers regarding further interest rate adjustments. The Fed has already implemented two rate cuts this year, and the monthly job growth has significantly decreased from around 150,000 in 2024 to approximately 50,000 in the first half of 2025.
Key Policymakers and Their Stances
Alberto Musalem, President of the Fed of St. Louis:
Musalem expressed skepticism about further monetary easing, emphasizing the need for caution. He pointed out that inflation is nearing 3.0%, exceeding the Fed’s target of 2.0%. He also noted that financial conditions, such as stock valuations and housing prices, are elevated. Moreover, monetary policy is approaching neutrality rather than a slightly restrictive stance, and the labor market has cooled in an orderly manner.
Musalem voted with the majority (10-2) to reduce the Fed’s policy rate by a quarter percentage point to the range of 3.75-4.0% last month.
Mary Daly, President of the Fed of San Francisco:
Daly demonstrated greater openness to further rate cuts, asserting that moderate wage growth indicates cooling labor demand. She also mentioned that tariffs have not broadly or persistently increased inflation.
Daly is attentive to the possibility of productivity gains from adopting artificial intelligence, which could enable faster economic growth without inflationary pressure.
“While I seek productivity increases and monitor if they continue, I also keep an eye on inflation to ensure it doesn’t rise in a way suggesting further action or extended positions,” Daly stated.
She also cautioned against keeping interest rates too high for an extended period, which could harm the economy.
Current Economic Conditions and Their Impact
Monthly job growth has fallen from around 150,000 in 2024 to approximately 50,000 in the first half of 2025. During this period, immigration decreased, reducing labor supply and likely increasing the unemployment rate to 4.4% in October, according to Fed of Chicago estimates.
“To get policies right, an open mind and thorough examination of evidence on both sides of the debate are required,” Daly said.
Governor Stephen Miran’s Call for a Significant Rate Hike
Stephen Miran, a Fed governor who advocated for a larger rate cut in October, believes that evidence supports further monetary easing. He noted rapidly falling inflation and a weakening labor market, making additional policy accommodation “imperative.” Miran reiterated his call for a half-percentage point rate cut at the upcoming Federal Open Market Committee (FOMC) meeting on December 9 and 10.
“I would say it’s reasonable to be progressively more moderate than in the September FOMC meeting, which again signaled three rate cuts of a quarter percentage point for late 2025,” Miran told CNBC.
