Fed Split Deepens Over Size of Next Rate Cut Amid Weak Labor Market and Data Gaps

As the Federal Reserve prepares for its late-October meeting, an internal debate has intensified over how aggressively to ease monetary policy in the face of a slowing U.S. labor market and rising geopolitical tension.

Federal Reserve Governor Stephen Miran has renewed his call for a half-percentage-point interest rate cut, arguing that current economic headwinds require a bolder move. He believes a sharper reduction would offer faster support to growth as hiring stalls and global uncertainty weighs on confidence.

However, Governor Christopher Waller has urged a more measured approach, favoring another quarter-point reduction instead. His view aligns more closely with the broader consensus inside the Fed, which remains cautious about moving too quickly and reigniting inflation.

In remarks this week, Waller said he would support a 25-basis-point cut at the October 29 meeting but stressed that future moves should depend on how recent softening in employment reconciles with still-solid GDP data. He warned that while the labor market’s slowdown is real, the Fed must avoid “undoing the progress” made in cooling inflation since last year’s peak.

The policy debate comes at a time when the government shutdown has disrupted the release of key economic data, leaving Fed officials with limited visibility on current trends. “It would be helpful to have the full set of data,” Miran said, acknowledging that the central bank may need to rely on forecasts rather than hard evidence when making its next decision.

Miran added that the economy “looks OK for most of this year,” but warned that escalating trade tensions between Washington and Beijing could further weaken growth — strengthening the case for faster and deeper rate cuts.

Both governors, appointed by President Donald Trump, have become central figures in shaping the Fed’s next moves. Waller, who is seen as a potential successor to Chair Jerome Powell when his term expires in mid-2026, emphasized two possible scenarios ahead: one in which the economy continues to expand, requiring restraint, and another in which a downturn emerges, justifying cumulative cuts of up to 1.25 percentage points.

Miran, meanwhile, expects his colleagues to approve another modest quarter-point cut this month but said he still believes the Fed should deliver three smaller cuts totaling 75 basis points by year’s end. “My view is that it should be 50,” he said, referring to the size of the next move.

The Federal Open Market Committee meets on October 28–29, with markets already pricing in a near certainty of a quarter-point reduction. What remains uncertain is how long the Fed can balance its dual mandate — taming inflation without triggering a deeper slowdown — while steering through a policy fog thickened by missing data, geopolitical risks, and growing divisions within its own ranks.