Fed Focuses on Curbing Inflation Rather Than Lowering Rates, Even as Economy Shows Strength

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Fed Focuses on Curbing Inflation Rather Than Lowering Rates, Even as Economy Shows Strength

Bitget-RWA2025/11/22 14:36

By:Bitget-RWA

- Boston Fed's Susan Collins opposes December rate cut, citing persistent inflation and a strong economy, emphasizing "restrictive policy is very appropriate right now." - FOMC meeting minutes reveal divided policymakers: Stephen Miran advocated larger cuts, while Kansas City's Jeff Schmid opposed any reduction, marking first 2019-style dissent. - Government shutdown delayed November jobs data until December 16, heightening uncertainty as officials struggle to assess economic conditions ahead of the Decemb

Susan Collins, President of the Federal Reserve Bank of Boston, has expressed doubts about the possibility of a rate reduction at the Fed’s December meeting, pointing to persistent inflation and a robust economy as key reasons. In a recent interview with CNBC, Collins stated that “maintaining a restrictive stance is the right approach at this time” due to current inflation trends, and she urged caution when considering further reductions in borrowing costs

Collins said

. Her comments reflect the general reluctance within the Federal Open Market Committee (FOMC),

as highlighted in recent meeting records

where most members did not support easing policy in December.

The Fed’s rate cut in October, its second consecutive reduction, was intended to support a weakening job market while continuing efforts to bring down inflation, which has stayed above the 2% goal for over four years

reports indicate

. Still, there is division among policymakers. The minutes from the October meeting pointed out that progress on inflation had “stalled,” and that cutting rates could threaten the Fed’s reputation for controlling price growth

the minutes show

. Fed Governor Stephen Miran argued for a deeper cut, while Kansas City Fed President Jeff Schmid was against any reduction, resulting in the first split dissent since 2019

according to the minutes

The Fed’s policy decisions have also been complicated by the government shutdown, which postponed the release of the November jobs report until December 16—just ahead of the December meeting

market analysts note

. The absence of this important data has increased uncertainty, with officials saying it is harder to gauge the economy’s health. In her interview, Collins mentioned that the mixed hiring numbers for September and the ongoing strength of the economy made her “reluctant” to support further action

she said

Fed Focuses on Curbing Inflation Rather Than Lowering Rates, Even as Economy Shows Strength image 0

At the same time, the Fed’s overall policy landscape is shifting. The central bank has recently

paused its quantitative tightening efforts

, which were designed to shrink its $6.6 trillion balance sheet by not replacing maturing bonds purchased during the pandemic.

Market responses to this uncertainty have varied. Analysts at Jefferies estimate that deregulation in the U.S. banking sector could free up $2.6 trillion in capital for major banks, potentially increasing lending and profits

Jefferies reports

. Yet, investors remain cautious. Shares of Compass Diversified jumped 13.3% after John Williams, President of the New York Fed, suggested that rate cuts could come “soon,” but overall, the market is still wary of inflation risks

market analysis shows

Looking forward, the Fed’s meeting on December 9-10 is expected to draw significant attention. While some, such as Williams, have indicated a willingness to consider easing, most policymakers seem inclined to keep rates steady until there is clearer evidence that inflation is slowing

the minutes indicate

. Collins’ position—based on her view that the economy can handle current rates—mirrors a broader group within the Fed that favors prioritizing price stability over aggressive stimulus measures

she explained in her interview

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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