"Federal Reserve Whisperer": Three rate cuts difficult to settle internal disputes, need to beware of "stagflation risks"

The "Fed Whisperer" Nick Timiraos' latest article indicates that Federal Reserve officials have cut interest rates for the third consecutive meeting, but there is larger concern regarding inflation or the job market. There is an unusually high level of internal division within the Fed, leading officials to suggest a lack of willingness to continue cutting rates. Recent public comments from Fed officials in the past few weeks have shown significant disagreement within the committee, to the extent that the final decision may depend on how Fed Chair Powell wants to proceed. Powell's term will expire in May next year, meaning he will only preside over the next three rate-setting meetings. Strong price pressures along with a cooling labor market have presented an unpleasant trade-off for the Fed, a situation not faced in several decades. During the "stagflation" period in the 1970s, when officials faced a similar dilemma, the Fed's stop-and-go approach allowed high inflation to become deeply entrenched. Jonathan Pingle, Chief U.S. Economist at UBS, stated: "With interest rates approaching a neutral level, each rate cut will lose support from more participants. You need data to motivate those participants to join the majority in order to achieve rate cuts."