The Federal Reserve's Dual Mandate Showdown: Deep Divisions Over December's Rate Decision

There is a deep disagreement among Fed officials over a potential December 2025 rate cut, driven by conflicting concerns about the labor market versus persistent inflation, all while facing potential pressure

The Federal Reserve is the nation’s central bank, responsible for managing the money supply and carrying out monetary policy. Its work is guided by the “dual mandate,” a directive from Congress that requires the Fed to pursue maximum employment and stable prices. In practice, that means steering the economy toward the lowest sustainable unemployment rate and maintaining inflation at roughly 2 percent over the long term.

During his second term, Trump ‌mounted an aggressive pressure campaign on the Federal Reserve, repeatedly urging policymakers to cut interest rates and openly suggesting he could dismiss Chair Jerome Powell. The Fed has already delivered two rate reductions this year, in September and October, and faces another decision on whether to ease again in December.

According to Investopedia, Federal Reserve officials hold differing views on whether the Fed should lower its benchmark interest rates. Fed Governor Stephen Miran, strongly favors a significant rate cut for December 2025, primarily due to concerns about the risks to the labor market and his view that inflation is under control. Raphael Bostic, President and Chief Executive Officer of the Federal Reserve Bank of Atlanta, who also serves as a participant on the Federal Open Market Committee (FOMC), argued that inflation is a greater threat than unemployment, and stated the Fed should keep rates higher longer to combat price increases. He also said that inflation has been higher than the Fed’s 2% target during the last five years.

It's no wonder that financial markets are uncertain about the Fed's next move at its December meeting. Traders are currently pricing in a 60% chance the Fed will cut its benchmark interest rate by a quarter of a percentage point next month, according to the CME Group's FedWatch tool, which forecasts rate movements based on fed funds futures trading data.

When inflation rises, the Federal Reserve generally responds by increasing the federal funds rate, which lifts borrowing costs and slows economic activity to help restore balance between supply and demand. When conditions in the labor market deteriorate, the Fed can move in the opposite direction, lowering interest rates to reduce the cost of credit and support job growth.

According to Bloomberg, futures tied to the Federal Reserve’s benchmark rate indicate that another cut at the Fed’s upcoming policy meeting on December 9–10 is now only moderately likely, rather than a virtual certainty.

Key Takeaways

1. The Federal Reserve, as the nation's central bank, operates under a "dual mandate" from Congress to achieve maximum employment and stable prices (target inflation of 2%).

   
   

2. The Fed implements policy by adjusting the federal funds rate, raising it to combat high inflation or lowering it to support job growth during labor market deterioration.

   
   

3. Leading up to the December 2025 meeting, there are divided views among Fed officials, with Governor Stephen Miran pushing for a significant rate cut due to labor market risks, while Atlanta Fed President Raphael Bostic favored keeping rates higher to address persistent inflation.

   
   

4. Political pressure is also a factor, as President Trump repeatedly urged the Fed to cut rates and even suggested dismissing Chair Jerome Powell.

   
   

5. Financial markets reflected this uncertainty, with traders pricing in a moderate likelihood of a further interest rate cut at the Fed's December policy meeting.