Debate within the Fed about cutting interest rates sharply remains 'hot'

New US Federal Reserve Governor Stephen Miran continued to push for sharp interest rate cuts to stem the weakening labor market, saying other Fed officials were overly concerned that tariffs would push up inflation.

Headquarters of the US Federal Reserve (FED) in Washington, DC Photo: THX/TTXVN

Mr. Miran believes that the policy interest rate should be cut by 2 percentage points, in 0.5 percentage point increments, at each of the upcoming Fed meetings, because when monetary policy is in such a tight state, the economy will be more vulnerable to adverse shocks.

Other Fed officials, meanwhile, have advocated for more cautious action, underscoring the difficulties Mr. Miran faces in internal debates about lowering interest rates, which he called for as an economic adviser to President Donald Trump.

Chicago Fed President Austan Goolsbee told reporters after an event in Grand Rapids, Michigan, where he described the labor market as stable and only mildly cooling, that cutting interest rates sharply before knowing whether the current inflation situation will persist could be a mistake.

San Francisco Fed President Mary Daly, speaking in Utah, noted warning signs from the labor market, including a lack of jobs for recent graduates and longer wait times for job seekers. But she said that with inflation still above its 2% target, even without the impact of tariffs, the Fed should slow down. Over time, she said, it will be necessary to continue to adjust rates gradually to achieve a level that balances the risks to the Fed’s maximum employment and price stability goals.

Even Michelle Bowman, the Fed’s vice chairwoman for supervision, a Trump appointee who agrees with Miran that Trump’s tariffs will not spark inflation, is less supportive of his call for aggressive rate cuts. She said the Fed could cut rates three times by 0.25 percentage points later this year, given the fragile labor market.

Kansas City Fed President Jeffrey Schmid said inflation remains too high and the labor market, while cooling, remains broadly balanced. He felt the Fed’s rate cut last week was a sound risk management strategy as the Fed balanced its inflation target with growing concerns about labor market conditions, but further rate adjustments would be data-dependent.

Last week, the Fed cut its policy rate by 0.25 percentage point, to 4-4.25%. Fed projections show most policymakers are leaning toward the possibility of further rate cuts this year, but about a third feel no further cuts are needed.

Mr. Trump criticized the Fed for not cutting interest rates and quickly appointed Mr. Miran to the Fed Governor position when a vacancy arose in August 2025. Mr. Miran was approved by the Senate on the eve of the Fed's September 16-17 meeting, where he was the only dissenting member, supporting a 0.5 percentage point rate cut.

Source: https://baotintuc.vn/kinh-te/tranh-cai-trong-noi-bo-fed-ve-viec-cat-giam-manh-lai-suat-van-nong-20250926155855790.htm