A Hawkish Dissent in a Dovish Decision
The Federal Reserve’s decision on October 29, 2025, to cut its benchmark interest rate by 25 basis points was not unanimous. In a clear sign of internal division, the vote was 10-2. Kansas City Fed President Jeffrey Schmid voted to hold rates steady, while Fed Governor Stephen Miran dissented in favor of a larger, 50-basis-point cut.
Schmid explained that his dissent was rooted in a primary concern: inflation remains “too high”. He expressed worry that a premature rate cut could undermine the Fed’s credibility and its long-term commitment to the 2% inflation target. He characterized the current monetary policy as only “modestly restrictive” and pointed to healthy consumer spending and business investment as evidence that the economy still has significant momentum, implying that continued restraint is necessary to fully tame price pressures.
The Data Behind the Caution
Schmid’s cautious stance is backed by recent economic data. The Consumer Price Index (CPI) for September 2025 came in at 3.0%. Meanwhile, the Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) index, is estimated to be running at about 2.8% annually. These figures remain notably above the central bank’s target.
This concern is echoed in consumer surveys. The New York Fed’s September Survey of Consumer Expectations showed that short-term inflation expectations had risen, with households anticipating higher costs for essential items like food, rent, and medical care in the year ahead. Schmid noted that in his own district, business contacts report “widespread concern over continued cost increases and inflation,” particularly regarding healthcare and insurance premiums.
The Broader Fed Context and Market Impact
Schmid’s view is not an isolated one. Other Fed officials, like Dallas Fed President Lorie Logan (who is not a voting member this year), have also expressed that they would have preferred to hold rates steady, citing that inflation “appears likely to exceed the FOMC’s 2 percent target for too much longer”.
This internal hawkish sentiment was amplified by Fed Chair Jerome Powell himself. Following the decision, he notably pushed back against market expectations, stating that another rate cut in December is not a “foregone conclusion — far from it”. This cautious tone from the top has immediately reshaped market pricing, with traders now seeing a significantly lower probability of a rate cut at the Fed’s December meeting.
This period of uncertainty for interest rates comes as the Fed is also navigating other complex policy shifts. In a separate move to address tightening liquidity conditions, the Fed recently announced a halt to its Quantitative Tightening (QT) program, underscoring the delicate balance the central bank is trying to strike between fighting inflation and ensuring financial stability.
