The Federal Reserve is heading into its September 15 and 16 policy meeting with an unusually public split among its own leadership over which way interest rates should move next.
Fed Chair Kevin Warsh, speaking at the Kansas City Fed's Jackson Hole symposium in late August, delivered a tough message on inflation that set up the September meeting as what one report called a pivotal moment in the central bank's effort to bring prices down. That message raised the possibility that the Fed could raise rates if inflation data does not improve. The Fed's rate setting committee had voted 9 to 3 at its late July meeting to hold the benchmark federal funds rate in a range of 3.5 to 3.75 percent, a split vote that itself signaled disagreement inside the building.
Since then, other Fed officials have struck a calmer tone. Governor Christopher Waller said this week he would support keeping rates where they are at the September meeting unless inflation data delivers a significant surprise, and separately described the labor market as being in "satisfactory shape." Fed Governor Michael Barr called the employment situation "stable" earlier in the week. Those comments helped ease bets on a September rate hike: swaps traders were pricing roughly even odds of a quarter point increase, down from about 70 percent earlier in the week, and the dollar fell to its lowest level since May.
Adding another layer, Vice President JD Vance said Thursday that the Fed should cut interest rates to make homes more affordable, adding to pressure that President Trump has already placed on the central bank to lower borrowing costs. That call for cuts stands in contrast to Warsh's warnings about inflation, illustrating the different pressures the Fed is weighing as it tries to balance a labor market that has cooled this year against inflation that officials say remains above their 2 percent target.
Friday's August employment report and upcoming inflation data will likely shape which side of the debate carries more weight when the Fed meets in two weeks.
When does the Fed meet next?
The Federal Open Market Committee is scheduled to meet September 15 and 16.
Is the Fed expected to raise or cut rates?
As of this week, market pricing showed roughly even odds of a rate hike, with officials publicly divided between holding steady and moving in either direction.