Recent Fed Meeting Recap

Christmas is exactly one week away, and we are in the middle of Hanukkah. It’s the holiday season so hoop-de-do and dickory dock. I am a BIG Christmas fan mainly for the Hallmark movies. They never disappoint.

Let's start with an update to a previous letter. I called out the White House for lying about September's inflation data. They claimed it was 2.5% even though it was 3% - the level it was at when Trump took office.

Karoline Leavitt and several White House reporters recently clashed over this. Here's a video recap. In this video, Karoline said the average CPI in the first 8 months of Trump's presidency is 2.5%. So, if I understand her correctly, they took all the CPI readings since inauguration and averaged them. That is not how we report CPI, and it's still a lie because averaging out all the reports gets you to 2.65%, not 2.5%.

Anyway, on to the recent Fed meeting.

If you've read previous letters about Fed meetings, this update will not surprise you.

Ultimately, the Fed voted to cut their benchmark interest rate by 0.25%. However, there was more dissent than usual. Two members voted to keep the rate the same, and one member voted to cut the rate by a more aggressive 0.5%.

Austan D. Goolsbee, President of the Federal Reserve Bank of Chicago, and Jeffrey R. Schmid, President of the Federal Reserve Bank of Kansas City, both voted to keep the rate the same. They argued in comments after the meeting that inflation has not yet returned to the Fed's 2% target and recent data has it going the wrong way. Additionally, they urged the board to wait for additional data before prioritizing labor market concerns over higher inflation.

Stephen Miran, Trump's recent appointee to the Federal Reserve Board of Governors, voted for the more aggressive 0.5% cut. Stephen's argument focused on lagging shelter inflation and downplaying tariffs' inflationary effect.

Stephen believes that shelter inflation is keeping core PCE elevated even though real shelter inflation indicators are trending down. Changes to net migration and new-tenant rents indicate that shelter inflation is two years behind current market trends. He argues that once shelter inflation catches up, core PCE will correct downward sharply.

Additionally, Stephen believes tariffs are not as inflationary as the rest of the board believes. He points out that Canada and the UK have similar inflation to the US even though they do not have the same tariff policies.

These stances, among others, led him to vote for a bigger cut to avoid a recession.

Lastly, he projects the appropriate 2026 rate for the Fed to be 2.125%. This is far below the average of 3.375% for the rest of the board members.

This meeting, with three dissenting votes, marks the largest disagreement since the September 2019 board meeting, which also had three dissenting votes.

One thing is clear: while the Fed cut rates this month, 2026 policy changes are far from certain. Each month's data (PCE, job numbers, CPI) will be heavily scrutinized.

Trump's appointee to replace Jerome Powell next year is guaranteed to vote in line with Stephen Miran in favor of cutting rates, but that is just one more vote out of 12. So, while you read about Trump's pick, keep in mind the Chair has no more power to cut rates than anyone else on the board.

Debrief on Deck

Next Thursday is Christmas! I am going to be spending time with family and friends trying to take a break from news and checking my accounts. I hope you do as well.

Our next letter will be the December recap! In that letter, I will also be detailing some changes coming to this newsletter in 2026.

As always, please reach out to us with any questions or comments you have by replying directly to this email.

Until then, stay the course.

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