New Fed Governor Stephen Miran defended his lone call for a 50bps rate cut last week, signaling he would back another such move if given the chance. In a speech overnight, Miran warned that the central bank is underestimating how tight policy is, putting the job market at risk without faster easing.

Miran argued that the appropriate federal funds rate should be in the “mid-2 percent area,” nearly 200 basis points below the current target. He said leaving policy this restrictive risks unnecessary layoffs and higher unemployment, with monetary settings “well into restrictive territory.”

His remarks highlighted the divide inside the FOMC. While Miran sees the economy requiring swift and decisive support, other Fed officials made clear they prefer a slower pace of adjustment.

Atlanta Fed President Raphael Bostic told the Wall Street Journal that inflation remains “too high for a long time” and warned against signaling premature victory. He flatly opposed another cut at the October meeting, indicating that “I today would not be…in favor of it.”

Cleveland Fed President Beth Hammack echoed caution, saying the policy rate is only a “short distance to neutral”. She warned that removing too much restriction could “start overheating again”, urging the Fed to tread carefully, and “stay restrictive to bring inflation back down to target.”

St. Louis Fed President Alberto Musalem said he backed last week’s 25bps cut as a “precautionary” measure to support employment but stressed there is only “limited room for easing further” without risking an overly accommodative stance.

St. Louis Fed President Alberto Musalem said he supported last week’s 25bps rate cut as a “precautionary move” to protect the labor market from further weakening. He emphasized in a speech, however, that there is only “limited room for easing further” before monetary policy risks becoming “overly accommodative.”

He stressed that while the Fed can provide insurance against labor market softness, it must also “lean against persistence in above-target inflation.”

Musalem added that he will continue to update his economic outlook in the months ahead to strike the right balance between employment and inflation.

Full speech of Fed’s Musalem here.

Minneapolis Fed President Neel Kashkari said the balance of risks facing the U.S. economy tilted toward the labor market rather than inflation. In an essay, he argued that given the “large concurrent changes” in trade, immigration, and tax policies, and the mixed signals in the economy, the more pressing danger is “rapid further weakening” in employment rather than a major inflation overshoot.

Kashkari noted that labor markets historically can deteriorate “quickly and non-linearly,” making preemptive action necessary. By contrast, he said tariff-related uncertainty implies a risk of inflation persistence near 3% rather than a sharp surge to 4–5%.

That backdrop led him to support this week’s rate cut, raising his own projection from two to three cuts this year in the Fed’s Summary of Economic Projections.

Still, Kashkari stressed that policy is not on a preset course. If the labor market proves more resilient or inflation surprises on the upside, the Fed should pause, or even consider raising rates again. Conversely, if jobs weaken more rapidly than expected, he said policymakers should be ready to act more aggressively to support growth.

Full essay of Fed’s Kashkari here.

The Fed cut interest rates by 25bps to 4.00–4.25%, in line with market expectations. The decision was not unanimous, with newly confirmed temporary Governor Stephen Miran dissenting in favor of a larger 50bps cut. However, notable doves Christopher Waller and Michelle Bowman aligned with the majority, helping to anchor the outcome around the base case.

In its statement, the Fed reiterated that any further adjustments will be guided by incoming data, the evolving outlook, and the balance of risks. The careful wording underscored policymakers’ preference for a step-by-step approach, avoiding a signal of urgency while still keeping the easing cycle in play.

The updated projections confirmed a measured path of rate cuts. The median federal funds rate is expected to fall to 3.6% by year-end, implying two more 25bps reductions in October and December. For 2026, the Fed sees rates at 3.4%, suggesting just one cut that year, followed by another in 2027 to land just above the estimated 3.0% longer-run neutral rate.

On the labor market, the Fed’s outlook improved slightly. Unemployment is now expected at 4.5% in 2025, 4.4% in 2026, and 4.3% in 2027, a modestly better path than projected in June. This adjustment reflects confidence that the labor market can soften without unraveling, helping to balance the inflation fight with growth stability.

Inflation forecasts also shifted. Core PCE is now projected at 3.1% in 2025, dipping more sharply to 2.6% in 2026 before easing further to 2.1% in 2027. The 2026 forecast was revised higher from 2.4%, likely reflecting temporary tariff-related pressures, but the trajectory still points toward inflation returning close to target over the medium term.

Full FOMC statement and economic projections.