Fed dissenters speak out: ‘The next rate change could be either a cut or a hike’

Three Federal Reserve officials offered insight about why they dissented at this past week’s meeting over the central bank’s bias toward cutting interest rates.

The policy statement released by the Federal Open Market Committee following the April 29 meeting said officials will consider the extent and timing of “additional adjustments” to interest rates.

“While that phrase is not a commitment to make further cuts to the policy rate, it is widely interpreted by Fed watchers to indicate the Committee’s expectation that the next adjustment to the federal funds rate would be a cut,” Minneapolis Fed president Neel Kashkari said in a statement.

Kashkari, along with Cleveland Fed president Beth Hammack and Dallas Fed president Lorie Logan, all supported holding interest rates steady but objected to the policy statement’s stance toward rate cuts.

Kashkari said he considers the language about additional rate adjustments to be a form of forward guidance on the direction of interest rates that no longer makes sense in light of the Iran war.

“Instead,” he wrote, “the FOMC should offer a policy outlook that signals that the next rate change could be either a cut or a hike, depending on how the economy evolves.”

Hammack called the phrasing a “clear easing bias.”

“This forward guidance was put into the statement to signal a pause rather than an end to the easing cycle,” Hammack said. “I see this clear easing bias as no longer appropriate given the outlook.”

Logan noted that the guidance evolved from the three rate cuts the Fed made last fall, which implied that the next change in interest rates would most likely be a rate cut.

“I disagree with that assessment of the policy outlook,” Logan said in a statement. “When the FOMC gives forward guidance, it is important for that guidance to reflect the policy outlook. In light of the two-sided risks to monetary policy, I believed the FOMC should not give forward guidance implying a bias toward rate cuts at this time.”

Fed governor Stephen Miran dissented on other grounds and from a differing viewpoint: He favored a quarter-point cut to the benchmark rate.

The Fed hasn’t seen four dissents in a policy vote in more than three decades.

Read more: How the Fed’s rate decision affects your bank accounts, loans, credit cards, and investments

Federal Reserve Bank of Cleveland President Beth Hammack speaks during an interview with Reuters in New York City, U.S., April 24, 2025. REUTERS/Mike Segar/File Photo · REUTERS / REUTERS Eyes on inflation

Before the conflict in the Middle East, Kashkari said he felt inflation was too high, but expected it to come back down as tariffs worked their way through the supply chain and into goods prices. Under that expectation, he thought further rate cuts would be appropriate over time.

But given the uncertainty about the conflict and its impact on inflation, employment, and economic growth, he said he believes the Fed should signal that the next rate change could be either a cut or a hike, depending on how the economy evolves.

Kashkari sees two scenarios. The first scenario is a benign one where the Strait of Hormuz opens fairly quickly and oil prices fall to around $88 by the end of the year. But he noted that even then, inflation is expected to be 3% this year, which would mark three years in a row at that level. In that scenario, Kashkari said he envisions holding rates where they are for an extended period and then easing only gradually once the inflation shock has begun fading.

The second scenario he outlined is more concerning, with an extended closure of the strait and potentially further damage to energy and commodity infrastructure in the Middle East. In that case, he said, oil prices would surge much more, driving up inflation and unemployment. This, coupled with inflation above the Fed’s 2% target for almost six years, could risk inflation expectations moving higher. He said a “strong policy response” would be warranted with rate hikes — potentially a series of them — even at the risk of the job market.

Hammack noted that inflation pressures remain broad-based and that rising oil prices add even more inflationary pressure. The Personal Consumption Expenditures index rose 3.5% in March, up from 2.8% in February before the Iran war began. Oil, meanwhile, reached $122 a barrel this week, driving ever-higher prices at the pump for consumers.

She sees the economy as resilient so far this year, with the unemployment rate little changed at 4.3%. However, she wrote that while she sees upside risks to inflation, she also sees downside risks to growth and employment.

Logan said she is concerned about how long it will take inflation to come back down to the Fed’s 2% goal, given that it has held above that level for more than five years. She noted that measures of inflation that strip out extreme price changes or categories with more volatile prices had been running above 2% before the Iran war, and that the conflict raises the risk of prolonged or repeated supply disruptions that could push inflation up further.

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