Two Federal Reserve Officials Oppose Interest Rate Cuts Explain Why Goulsby Is Optimistic About the 2026 Interest Rate Cut

Chicago Federal Reserve Chairman Goulsby said that he is relatively more optimistic about the prospects for interest rate cuts in 2026, but he still voted against cutting interest rates this week because he wants to wait for more inflation data.

The Zhitong Finance App learned that in a TV interview on Friday, Goulsby said that he doesn't think he is hawkish in terms of interest rates next year. “I am one of the most optimistic people about the decline in interest rates in the next year.” His statement came after the Federal Reserve decided to cut interest rates this week, and he himself voted against it at that meeting. This is also Goulsby's first opposition vote since joining the Federal Reserve in 2023, and is in line with Kansas City Federal Reserve Chairman Schmid's position. Schmid previously opposed interest rate cuts at the October meeting and voted against it again this week.

Earlier, Goulsby issued a statement explaining the reasons for his vote, saying that inflation has remained above target for four and a half years, and progress in improving inflation has stalled in recent months. Furthermore, both businesses and consumers have recently generally viewed price issues as a major concern in their jurisdictions. In this context, he believes the more prudent approach would be to wait for more information rather than cut interest rates immediately.

Although Federal Reserve Chairman Powell successfully pushed for the third 25 basis point rate cut this year at Wednesday's meeting, judging from the details of the meeting, the opposition was actually broader than the apparent two negative votes, indicating that differences within decision makers over the policy path are growing.

In contrast to this, Philadelphia Federal Reserve Chairman Paulson sent a more dovish signal on Friday. She said that compared to the risk of rising inflation, she is still more concerned about the possibility that the labor market will weaken. Paulson will take turns in the Fed's voting lineup next year, while Goulsby and Schmid will take turns leaving. At an event in Delaware, she pointed out that inflation is likely to continue to fall next year, and although the labor market is still performing well, downside risks are rising.

Goulsby also mentioned in the statement that the inflation data released before the government shut down in October and November made him more cautious about cutting interest rates in the short term. Due to the government shutdown, the release of a number of key economic data has been delayed, leaving policy decisions facing an information vacuum. He said that there were some worrying readings before the data “went silent,” but more critical information will be obtained one after another in the next few months. He hopes that these data will strengthen confidence that inflation is steadily returning to the 2% target.

In another statement, Schmid also explained why he opposed interest rate cuts for the second time in a row. He pointed out that inflation is still high, the economy maintains momentum, and although the labor market is cooling down, the overall balance is still relatively balanced. In his view, the current monetary policy stance is, at best, only moderately restrictive, and may not even have an obvious deterrent effect.