2026 FOMC Voter Division on Fed Rate Cuts and Inflation Credibility

The December 12, 2025 WSJ report [3] highlights division among 2026 voting Federal Open Market Committee (FOMC) officials regarding the credibility risks of continuing rate cuts amid above-target inflation. This follows the Fed’s December 10, 2025 policy meeting, where officials cut the federal funds rate by 0.25% to 3.5%–3.75% in a 9-3 vote—marking the first three dissents in six years [0, 1]. Dissenters and cautious 2026 voters argue that cutting rates while core inflation (2.8% as of September 2025 [0]) remains above the 2% target could signal complacency, unanchor long-term inflation expectations, and erode the Fed’s credibility [0, 3]. Conversely, supporters of rate cuts emphasize concerns about a cooling labor market (4.4% unemployment in September 2025 [0]) and the need to avoid economic contraction.

The Fed’s post-meeting SEP complicates the outlook, with seven policymakers projecting no further rate cuts in 2026—contrasting the median projection of one cut and market expectations of two cuts [2]. Pending leadership changes (Fed Chair Jerome Powell’s term ends in May 2026 [0]) add to the uncertainty, as a new chair could shift policy direction.

1. Prolonged Policy Uncertainty
   : Division extends beyond the immediate December 2025 rate cut to 2026, signaling sustained uncertainty about the Fed’s rate path.
2. Data Constraints
   : A government shutdown delayed recent inflation data, leaving policymakers reliant on outdated September 2025 figures, complicating evidence-based decisions [0].
3. Credibility-Effectiveness Link
   : Eroded inflation-fighting credibility could lead to higher long-term borrowing costs, reducing the effectiveness of future monetary policy [0].

• Risks
  :
  • Fed credibility damage if inflation fails to cool to 2%, leading to elevated long-term interest rates [0].
  • Increased market volatility as investors reassess the central bank’s commitment to inflation targeting [0].
  • Dampened business and consumer confidence, delaying investment and spending decisions amid policy uncertainty [2].

• Opportunities
  :
  • Well-timed rate cuts could support economic growth without reigniting inflation, but this hinges on a consistent downward trajectory in inflation data.

• Event Date
  : December 12, 2025 (WSJ report publication)
• Policy Rate
  : 3.5%–3.75% (post-December 10, 2025 cut)
• Inflation Status
  : Core PCE inflation at 2.8% (September 2025, latest available)
• 2025 Vote Outcome
  : 9-3 in favor of rate cut (3 dissents)
• 2026 SEP Projections
  : 7 policymakers expect no rate cuts; median projection of 1 cut
• Leadership Context
  : Jerome Powell’s term as Fed Chair ends in May 2026

This summary provides objective context for decision-making without prescriptive recommendations.