{"id":150601,"date":"2025-08-16T13:35:15","date_gmt":"2025-08-16T13:35:15","guid":{"rendered":"https:\/\/www.europesays.com\/us\/150601\/"},"modified":"2025-08-16T13:35:15","modified_gmt":"2025-08-16T13:35:15","slug":"federal-reserve-officials-are-divided-over-competing-concerns","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/us\/150601\/","title":{"rendered":"Federal Reserve officials are divided over competing concerns"},"content":{"rendered":"

WASHINGTON \u2014 One major question will be front and center for Federal Reserve policymakers as they prepare for an annual conference in Jackson, Wyoming<\/a> next week and a crucial policy meeting in September: Which is a bigger problem for the economy right now, stubborn inflation<\/a> or slower hiring<\/a>?<\/p>\n

Weak job gains since April have pushed some officials toward supporting a cut in the Fed\u2019s key rate as soon as next month, but speeches and comments by other Fed policymakers show that inflation is still a concern.<\/p>\n

That could make the Fed\u2019s ultimate move at its September 16-17 meeting a close call. There will be another jobs report and another inflation report before then, and both will likely heavily influence the decision of whether to cut or not. The uncertainty also means that Fed Chair Jerome Powell\u2019s speech next Friday in Jackson will be closely watched for any clues about next steps.<\/p>\n

If Fed officials worry more that unemployment will start to rise and the economy falter, they are more likely to reduce their rate in order lower borrowing costs and spur borrowing and spending. Yet if their concerns grow that inflation will stay high or worsen as tariffs ripple across global supply chains<\/a>, they will lean more towards keeping borrowing costs high to cool the economy and lower prices. The rate currently stands at 4.3%.<\/p>\n

Wall Street investors are pretty certain \u2014 for now \u2014 that the central bank will reduce rates in September, with futures prices putting the odds of a cut at 93%, according to CME Fedwatch.<\/p>\n

Those odds jumped after the monthly jobs report Aug. 1<\/a> showed that hiring was sluggish in July and was much lower than previously estimated in May and June. Average job gains over those three months fell to just 35,000, down from 123,000 a year ago.<\/p>\n

And Tuesday\u2019s inflation report, which showed only a mild pickup in inflation<\/a> at the consumer level and limited signs that tariffs were pushing goods prices higher, underscored the view of some officials that they could put inflation concerns aside and focus on shoring up the job market instead.<\/p>\n

\u201cWith underlying inflation on a sustained trajectory toward 2%, softness in aggregate demand, and signs of fragility in the labor market, I think that we should focus on risks to our employment mandate,\u201d Michelle Bowman, a member of the Fed\u2019s governing board, said last week.<\/p>\n

Yet Austan Goolsbee, president of the Federal Reserve\u2019s Chicago branch, downplayed the weakness in hiring in remarks to reporters Wednesday. The slowdown in job gains could partly reflect the drop in immigration stemming from President Donald Trump\u2019s border crackdown, Goolsbee said, rather than a weaker economy. He also pointed to the still-low unemployment rate of 4.2% as evidence that the job market is solid.<\/p>\n

This week\u2019s inflation report included some warning signs, Goolsbee added: Prices of many services that aren\u2019t affected by tariffs, such as dental care and air fares, jumped, a sign that inflation may not be in check.<\/p>\n

\u201cThat was the most concerning thing in the inflation report, and if that persisted, we would have a hard time getting back to 2%,\u201d Goolsbee said, referring to the central bank\u2019s inflation goal. \u201cI am still hopeful that will not be a lasting problem.\u201d<\/p>\n

Fed officials also disagree on how tariffs will affect inflation going forward. Many increasingly believe the duties will result in simply a one-time boost to prices that will quickly fade and not lead to ongoing inflation.<\/p>\n

\u201cTariffs will boost inflation in the near term, but likely not in a persistent way\u201d that would require the Fed to keep rates elevated, Mary Daly, president of the Fed\u2019s San Francisco branch, said in a recent speech.<\/p>\n

Daly also said the labor market has \u201csoftened\u201d and suggested the Fed \u201cwill likely need to adjust policy in the coming months.\u201d<\/p>\n

However, Raphael Bostic, president of the Fed\u2019s Atlanta branch, said Wednesday that the tariffs could lead to longer-term inflation if they cause more manufacturers to shift output from lower-cost locations overseas back to the United States, or to other countries with higher wages. Such a change would be more than just a one-time shift.<\/p>\n

\u201cYou\u2019re going to see fundamental structural changes if this is successful,\u201d Bostic said in remarks in Red Bay, Alabama. \u201cIt is actually a different economy.\u201d<\/p>\n

In that scenario, Bostic said, he would prefer to wait \u201cuntil we have a little more clarity.\u201d And he added that with unemployment low, \u201cwe have the luxury to do that.\u201d<\/p>\n

Thursday\u2019s July wholesale price report, which showed a sharp jump in goods and services prices<\/a> before they reach the consumer, did make one move less likely: A half-point cut in September, as suggested by Treasury Secretary Scott Bessent.<\/p>\n

Alberto Musalem, president of the Fed\u2019s St. Louis branch, who votes on Fed policy this year, said that a reduction of that size is \u201cunsupported by the current state of the economy, and the outlook for the economy,\u201d in an interview on CNBC.<\/p>\n

Tim Duy, an economist at SGH Macro, said Thursday that the Fed may have to raise its inflation forecast at its September meeting when it provides its latest set of quarterly economic projections. The central bank\u2019s policymakers currently expect inflation, excluding volatile food and energy, to reach 3.1% by the end of this year, yet inflation is already near that level.<\/p>\n

Cutting rates at the September meeting would be hard for the Fed if it is also forecasting higher inflation, Duy said.<\/p>\n

\u201cThere are things that could happen that would push the Fed off the path\u201d toward a rate cut, he said. \u201cWe\u2019re not paying adequate attention to those risks.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"WASHINGTON \u2014 One major question will be front and center for Federal Reserve policymakers as they prepare for…\n","protected":false},"author":3,"featured_media":150602,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[64,79,67,132,68],"class_list":{"0":"post-150601","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-economy","10":"tag-united-states","11":"tag-unitedstates","12":"tag-us"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/115038710935836381","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/150601","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=150601"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/150601\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/150602"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=150601"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=150601"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=150601"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}