The Fed Has Rarely Been So Divided Over Its Long-Term Plan for Interest Rates

Group 1 - The Federal Reserve is experiencing significant disagreement among officials regarding the appropriate endpoint for interest rate cuts, with estimates diverging more than ever since 2012 [1][4] - Fed Chair Jerome Powell has acknowledged the differing views within the rate-setting committee, highlighting the tension between prioritizing stable prices versus maximum employment [2][3] - The concept of the "neutral" interest rate, which neither stimulates nor constrains the economy, is currently a focal point of debate among Fed officials [3][5] Group 2 - In September, 19 Fed officials provided 11 different estimates for the neutral rate, ranging from 2.6% to 3.9%, indicating a wide range of opinions [4] - The estimates are becoming increasingly significant as the Fed's benchmark approaches the upper edge of the range, complicating future rate cuts [5] - Philadelphia Fed President Anna Paulson expressed caution heading into the December meeting due to the risks of higher inflation and unemployment, suggesting that monetary policy must balance carefully [5][6]