Inflation stimulus or employment concerns? Fed interest rate cuts spark growing tensions

While the Federal Reserve (FRB), the central bank of the United States, is expected to cut interest rates next month, assessments of the employment situation are divided among FRB officials.
The Wall Street Journal reported on the 21st (local time) that internal conflicts over interest rate policy are deepening.
According to the WSJ, on the same day, Loretta Mester, president of the Federal Reserve Bank of Cleveland, spoke to the Jackson Hole, Wyoming,
In an interview at the meeting, he said, "Inflation remains high and is even trending upward," and assessed the labor market as "fairly healthy."
At the next Federal Open Market Committee (FOMC) meeting on the 17th, he said, "I don't see any reason to lower interest rates," and added, "Based on the data I have right now, I'm not in favor of lowering interest rates."
"I don't think we're going to get anywhere," she said. Mester had a vote at the FOMC last year, but not this year. She voted for rate cuts in September and November.
However, in December he opposed a rate cut. He said the current policy interest rate is a so-called neutral interest rate that neither stimulates nor suppresses economic growth.
"The situation today is completely different from last year. The job market is relatively stable and inflation is on the rise.
"I don't think it's appropriate to lower interest rates in this environment," she said. Furthermore, she said that rate cuts would incentivize companies to absorb the costs of higher tariffs rather than to do so.
He expressed concern that this could shift the burden onto consumers, posing a new risk to the current situation in which inflation has exceeded the Fed's target of 2% for four consecutive years.
"It will take time for the tax to be passed through supply chains and into markets," he said. Meanwhile, inflation remains above the Fed's target and the labor market shows signs of slowing.
At the FOMC meeting held on the 30th of last month, the base rate was kept between 4.25 and 4.5 for the fifth consecutive time.
At the time, Vice Chair Michelle Bowman and Board member Christopher Waller opposed the majority opinion and argued for a rate cut.
It was the first time the Fed had expressed an opinion in 32 years, since 1993. At the time, Wall Street suggested that pressure from President Donald Trump to lower interest rates may have played a role.
Following the release of July employment data on the 1st, which fell short of expectations, the market is viewing a September interest rate cut as a fait accompli.
Meanwhile, Boston Fed President Susan Collins said in another interview:
While expressing concern about inflation, she also showed an open mind, saying that interest rates could be lowered as early as next month. "High tariffs are squeezing consumer purchasing power and leading to a decline in consumption," she said.
Collins warned that there is a risk that employment will weaken more than expected, and that data available by the time of the September FOMC meeting will "reduce the risk of high inflation."
She said it may be appropriate to begin lowering interest rates if there are signs that "the risks to the labor market outweigh the risks to the economy."
She also predicted that inflation would continue to trend upward through the end of this year before turning downward again in 2026. "We are looking forward to a more significant and long-term price increase," she said.
"It's too early to completely rule out the possibility of a rise," he said, but emphasized that "it will be too late to take action once all the information is available."