As annual inflation remains above 2% and the labor market shows weakness, the Federal Reserve has been split in recent months over the direction of monetary policy. The past year has seen split votes among the Federal Open Market Committee (FOMC) voting committee on interest rates-setting; the July FOMC, for instance, saw Fed Governors Michelle Bowman and Christopher Waller dissent from the majority, the first outcome of this type since 1993.
The latest Fed minutes report, recapping the December FOMC meeting where members voted to cut interest rates 25 basis points by a 9-3 vote, shows that the cracks of disagreement remain unsealed. What does this suggest for more interest rate cuts in 2026?
The rate cut itself and the Fed minutes show that concerns about the labor market, such as low hiring and reports of planned layoffs, outweighed the concerns about inflation for a majority of the board. At a press conference following the December FOMC, Fed Chair Jerome Powell noted the voting board was in broad agreement about the issues—inflation is too high and the labor market is softening—the dissents are about how to best fix this situation.
“Participants generally viewed the low dynamism in the labor market as reflecting both lower labor demand amid economic uncertainty or efforts by businesses to contain costs and decreased labor supply associated with lower immigration, the aging of the population or reduced labor force participation,” the report stated in recapping the FOMC’s labor market concerns. Overall, Fed voting participants agreed that the risks to the labor market are currently “tilted to the downside,” meaning rising unemployment is a chief concern.
The risks of inflation “remain tilted to the upside” (i.e., that inflation is and risks continuing to run too high) but at a diminished state compared to previous months in the latter half of 2025. Inflation moved up in September 2025, but as voting participants noted, the government shutdown meant a lack of more recent inflation data to consider. Consensus is that tariffs boosted inflation and this will dissipate, though to what degree was debated. While inflation has moved away from the Fed’s goal of a 2% annual rate, voting participants said they expected it to move slowly toward that figure in 2026, along with disinflation among housing goods and services.
In the outlook for future rate cuts in 2026, the minutes noted a “range of views about the restrictiveness of the Committee’s policy stance.” Some participants said that if inflation comes down in 2026, then “further downward adjustments” to monetary policy could be an appropriate course of action. Others put forth that moving to a “more neutral” monetary policy stance could head off further labor market deterioration.
On the other hand, other participants argued that lowering rates further could “entrench” higher inflation and suggest a lack of commitment to achieving 2% annual inflation. Retiring Atlanta Fed President and non-voting FOMC member Raphael Bostic made comments to this effect later in December after the rate cut decision.
A point of consensus among the participants is that “monetary policy was not on a preset course and would be informed by a wide range of incoming data, the evolving economic outlook and the balance of risks.” Powell similarly indicated at the December press conference that the FOMC will be closely looking at economic data and weighing any possible distortions, again suggesting a “wait and see” mindset for any future rate cuts.
In economic data reports released since the December FOMC, inflation appears to be slightly down, while unemployment has reached its highest rate since September 2021. Only time will tell if the trends suggested by these datapoints will continue into 2026.
Who at the FOMC dissented in December?
The dissension at the December FOMC came from Fed Governor Stephen Miran, who wanted a larger half-point rate cut, as well as Chicago Federal Reserve President Austan Goolsbee and Kansas City Federal Reserve President Jeffrey R. Schmid, who both preferred to keep interest rates as is.
Miran, appointed in September 2025 by President Donald Trump, to complete the term of retired Fed Governor Adriana Kugler, has consistently pushed for steeper rate cuts at FOMC meetings and in public comments. This echoes the President’s own calls for the Fed to cut rates; Trump has repeatedly attacked Powell for being “too late” in cutting interest rates. Miran’s voting record, and his refusal to resign from his post as head of the White House Council of Economic Advisors, has led to criticisms about conflicts of interest as far back as his Senate confirmation hearing.
Miran’s term on the Fed expires on January 31, 2026, but he is permitted to remain until a successor is officially confirmed; he said in December that he intends to do so. Trump indicated in his announcement of Miran’s nomination in August 2025 that he intended to find a different “permanent replacement” to serve a full 14-year term on the Fed, but it remains to be seen if he will indeed do so or simply renominate Miran to the full term.
Powell’s own term as chair of the Federal Reserve ends in May 2026; he has the option to continue on the board of governors until January 2028, though traditionally Fed chairs leave entirely after their term ends. Trump has said he intends to announce his pick to replace Powell as Fed chair this January.
For the full December 2025 Fed Minutes report, click here.
