Within a day, three senior executives expressed concerns, making it increasingly difficult for the Federal Reserve to cut interest rates in December

The internal divisions within the Federal Reserve have intensified, as three senior officials expressed concerns about inflation on the same day, making the prospect of a rate cut in December more uncertain.

On Thursday, Federal Reserve Governor Michael Barr stated that given the inflation rate is still hovering around 3%, which is far from the 2% target, the Federal Reserve needs to proceed cautiously when considering further rate cuts.

While Barr did not explicitly oppose a rate cut, his concerns about inflation will complicate decision-making. According to futures pricing, investors currently estimate the likelihood of a rate cut at the December meeting to be only around 40%.

Almost simultaneously, Cleveland Fed President Beth Hammack reiterated her opposition to further rate cuts, and Chicago Fed President Austan Goolsbee also expressed unease about a rate cut in December.

Governor Barr Shifts to a Cautious Stance

As a Federal Reserve Governor, Michael Barr's position is crucial. He previously supported rate cuts in September and October but has not clearly stated his stance on December's actions.

Given that several colleagues have publicly expressed support for or opposition to a third rate cut, Barr's vote could be decisive.

On Thursday, Barr clearly articulated his concerns. He stated:

I am worried that the inflation rate we are seeing is still hovering around 3%, while our target is 2%, and we are committed to achieving that target.

He emphasized:

Therefore, we need to be careful with monetary policy, as we want to ensure we achieve both aspects of our dual mandate.

Although Barr did not directly state opposition to another rate cut, his unease about stagnant inflation will undoubtedly complicate Powell's efforts to build consensus before the December meeting.

On Thursday, the September employment report released by the U.S. Bureau of Labor Statistics presented a complex situation, with employers adding a net of 119,000 jobs, the best performance since April, but the August data was revised down, and the unemployment rate slightly rose to 4.4%.

After the data release, Barr stated that he believes the labor market has "cooled somewhat," and the pace of job creation is approaching the so-called balanced level that maintains a stable unemployment rate.

Hammack Warns of Financial Stability Risks

In contrast to Barr's caution, Cleveland Fed President Beth Hammack's stance is much firmer.

On Thursday, she reiterated her opposition to further rate cuts, arguing that doing so could threaten financial stability.

Hammack pointed out that high inflation remains "a real issue" for the U.S. economy and is "heading in the wrong direction." She warned that:

Lowering interest rates to support the labor market could prolong the period of high inflation and may encourage risk-taking behavior in financial markets.

Hammack stated:

This means that when the next economic recession arrives, its scale could be larger than originally expected, and its impact on the economy could be greater.

Regarding the latest non-farm payroll data, Hammack described it as "stale" and believed it highlighted the challenges the FOMC faces in monetary policy. Hammack will become a voting member of the FOMC in 2026. **

Goolsbee expresses concern about inflation trends

As a voting member of this year's FOMC, Chicago Federal Reserve President Austan Goolsbee also expressed worries about a rate cut in December.

He stated at an event in Indianapolis that he feels "a bit uneasy" about another rate cut. Goolsbee pointed out:

Inflation seems to have stagnated and even issued warnings of moving in the wrong direction.

This sense of stagnation makes him uneasy and suggests that he may not be inclined to support further easing of monetary policy in the absence of improvements in the inflation outlook.

Goolsbee is a voting member of the Federal Reserve's FOMC this year