Fed Governors Present Diverging Views on October Rate Cut
Federal Reserve Governors Stephen Miran and Christopher Waller expressed differing opinions on the size of the upcoming interest rate reduction as the Federal Open Market Committee (FOMC) prepares to meet later this month. Miran advocates for a half percentage point cut, while Waller favors a more moderate quarter percentage point reduction. Speaking at separate events, both officials acknowledged the challenges posed by a softening labor market and ongoing geopolitical tensions, yet they diverged on the pace and scale of easing required to sustain economic growth and control inflation.
Waller Endorses Cautious 25 Basis Point Cut
At the Council on Foreign Relations, Governor Waller underscored his support for a quarter-point rate cut at the October 29 meeting, a stance that aligns more closely with the broader Fed consensus.
“Based on all of the data we have on the labor market, I believe that the FOMC should reduce the policy rate another 25 basis points at our meeting that concludes Oct. 29,” Waller stated. “But beyond that point, I will be looking for how the solid GDP data reconcile with the softening labor market.”
Waller highlighted two potential scenarios: one where GDP growth and labor conditions improve, warranting a gradual approach to cuts, and another where economic deterioration may require more substantial easing, potentially totaling up to 1.25 percentage points. He cautioned against rushing rate reductions that could reignite inflationary pressures, emphasizing the importance of preserving recent inflation gains.
Miran Advocates More Aggressive 50 Basis Point Cut
Governor Miran, who was the sole dissenting vote against a half-point cut at September’s FOMC meeting, reiterated his call for a 50 basis point reduction this month, citing concerns over escalating U.S.-China tensions and a weakening labor market.
“My view is that it should be 50,” Miran told Fox Business. “However, I expect it to be an additional 25 and I think that we’re probably set up for three 25 basis point cuts this year, for a total of 75 basis points this year.”
He acknowledged that his colleagues are likely to support a smaller cut but emphasized that current economic conditions justify a more aggressive easing path.
Economic Data and Policy Challenges
The Fed’s decision-making is complicated by conflicting economic signals. While inflation pressures remain persistent, the labor market has shown signs of softening. Additionally, tariffs imposed under the Trump administration continue to cloud the inflation outlook. A government shutdown has further hindered the availability of key economic data, forcing policymakers to rely more heavily on forecasts than real-time indicators.
“It would be really helpful to have the economic data in order to be able to make the decisions we need to make,” Miran said. “Certainly, we would want to be inspecting the economy for signs of moves lower in inflation, for signs of changes in the job market. But without those data, we still have to make a decision anyway, and so we’ll have to rely upon our forecasts for doing so.”
Despite these challenges, Miran described economic growth this year as largely stable but expressed concern about worsening geopolitical risks, particularly between the U.S. and China.
Market Implications Ahead of Fed Meeting
As the FOMC convenes on October 28-29, markets are pricing in nearly a 100% probability of a quarter-point rate cut. The divergence between Miran and Waller reflects broader uncertainty about the appropriate pace of easing amid uneven economic signals. Investors will be closely watching the Fed’s forward guidance for clues on the total magnitude of cuts expected through the end of the year and into 2026, especially given the potential for geopolitical developments to influence economic conditions.
FinOracleAI — Market View
The contrasting perspectives of Governors Miran and Waller underscore the Fed’s delicate balancing act amid a complex economic environment. While inflation remains a persistent threat, labor market softness and geopolitical risks push for accommodative measures. The upcoming FOMC meeting is likely to deliver a quarter-point rate cut, but the trajectory beyond October remains uncertain.
- Opportunities: Gradual rate cuts could support sustained economic growth without reigniting inflation.
- Risks: Insufficient easing may exacerbate labor market weakness; overly aggressive cuts could undermine inflation control.
- Geopolitical tensions, particularly U.S.-China relations, could materially impact economic forecasts.
- Data disruptions due to government shutdowns increase uncertainty in policymaking.
Impact: The Fed’s October decision will set the tone for monetary policy in the near term, balancing inflation containment with the need to support a slowing labor market amid geopolitical challenges.
