Split Fed… Pro-Trump Myron Says 'Big Cut' vs One Member Says 'Hold'

The U.S. central bank (Fed) on the 29th (local time) cut its benchmark interest rate by 0.25 percentage points as markets expected, but it is likely to become more difficult to predict the future policy path. This is because the federal government shutdown has reduced the data the Fed relies on, and differences in views on monetary policy among members were also confirmed.

At this FOMC, for the first time since 2019, members disagreed on the direction of rates. Donald Trump’s economic adviser Steven Myron, a Fed board member, said, as at the previous meeting, "a larger cut (a 'big cut') is needed," while Jeffrey Schmid, president of the Federal Reserve Bank of Kansas City, opposed cutting rates and argued for a hold.

Fed Chair Jerome Powell stressed at the press conference that "there were strong differences of opinion among members at today’s meeting." The Wall Street Journal (WSJ) explained that "Powell’s repeated comments that the differences were very large clearly showed that a reluctance within the Fed to pursue further cuts is spreading."

The federal government shutdown, which halted official economic data releases, also added to internal confusion. Eswar Prasad, an economics professor at Cornell University, warned to the Financial Times (FT) that "this rate cut was a relatively easy decision, but now the Fed may be in a situation of 'flying blind' without data indicators," adding "this makes it more vulnerable to political pressure." Chair Powell also acknowledged that the lack of data could affect future discussions.

That day Bloomberg’s dollar spot index rose as much as 0.4% intraday, marking the largest one-day gain since the 9th. The dollar strengthened after Powell’s remark that a December rate cut is not a foregone conclusion.

Reporter Han Gyeong-je