Fed Officials Break Silence After Rate Cut — Evening Brief – 12.12.25 

Now that the Fed’s post-meeting blackout has lifted, regional presidents are spelling out starkly different views on the December quarter-point rate cut that brought the federal funds rate down to 3.50%–3.75%.  

Paulson: More Worried About Labor Weakness Than Inflation Risk 

Philadelphia Fed President Anna Paulson said she is “a little more concerned about labor market weakness than about upside risks to inflation,” noting that policy remains “somewhat restrictive” with inflation running near 2.8% and expected to drift back toward 2% as tariff effects fade and housing pressures ease. She stressed that credibility is central to how the Fed manages potential tariff-driven inflation, arguing that public confidence in the central bank gives it room to “take out some insurance” against labor-market damage without abandoning its 2% goal.  

Schmid: Inflation Still “Too Hot” and Policy Barely Restrictive 

Kansas City Fed President Jeffrey Schmid took the opposite tack, reiterating that inflation is still “too hot” and warning that any rise in inflation uncertainty could push long-term interest rates higher, including on U.S. government debt. Schmid dissented for a second straight meeting, opposing the 25-basis-point cut and arguing that policy should remain “modestly restrictive” given an economy he sees as still showing momentum and an unemployment rate that remains relatively contained.  

Goolsbee: Rate Cuts Should Not Be Front-Loaded 

Chicago Fed President Austan Goolsbee also dissented, saying the more prudent course would have been to wait for additional data—especially on inflation—before cutting again, given the recent gaps in official statistics. He noted that inflation has been above target for more than four years and that, absent clear signs of rapid labor-market deterioration, he is uneasy about “front‑loading” rate cuts and simply assuming that recent inflation improvement will prove durable, even as he remains optimistic that rates can move “down a significant amount” over the next year. 

For markets, the diverging commentary underscores a Fed that is increasingly data-dependent and internally divided on the pace of easing, reinforcing the risk of a choppy policy path in 2026. The push‑and‑pull is likely to keep rate‑cut odds, the front end of the yield curve, and risk assets especially sensitive to each incremental data release on inflation, jobs, and corporate activity in the months ahead.