Fed official sends strong signal on December interest-rate cut

Core Viewpoint - The Federal Reserve's stance on interest rates is shifting, with officials expressing concerns that further cuts could exacerbate inflation rather than support the labor market [1][2][3]. Group 1: Federal Reserve's Position - Kansas City Federal Reserve President Jeff Schmid indicated that additional interest-rate cuts might solidify higher inflation instead of aiding the cooling labor market [2][3]. - Schmid's remarks have influenced market expectations regarding a potential interest-rate cut in December, which was previously anticipated with near certainty [2][3]. - The Fed's dual mandate requires balancing price stability and low unemployment, complicating monetary policy decisions [3]. Group 2: Labor Market and Inflation - Pre-shutdown data showed unemployment stable at 4.3%, but there are rising concerns about fewer job openings and new hires [4]. - Annual inflation stands at 3%, above the Fed's 2% target, indicating ongoing price pressures despite a recent interest rate cut [5]. - The increase in costs for essentials like groceries, rent, and utilities is affecting household and business sentiment towards the economy [6]. Group 3: Economic Indicators and Challenges - Price pressures are attributed to both tariff-related inflation and emerging concerns in the service sector, particularly in elder-care and day-care costs [9]. - The government shutdown has created a data gap, forcing the Fed to rely on private surveys and alternative data sources for economic indicators [9].