Both hawks and doves cite major rules to justify their stance. But the division inside the Fed isn’t dysfunction — it’s a sign of officials taking both mandates seriously.

Federal Reserve policymakers are expected to trim their interest rate target by a quarter percentage point at this week’s meeting, lowering the range to 3.5–3.75 percent. On its face, that might seem like a standard adjustment. The Fed reduced rates by a similar 25 basis points at its previous two policy meetings. Yet this one stands out, not because of the size of the move, but because of the unusually visible division among policymakers.

Fed officials appear more divided than at any time in recent history. Some are increasingly uneasy about a cooling labor market, while others remain focused on inflation that has not yet returned to the Fed’s two-percent goal. What makes this disagreement noteworthy is the fact that both sides can plausibly claim the data is on their side.

The latest Monetary Policy Report, released by AIER’s Sound Money Project this week, shows that the leading monetary policy rules offer support for both sides of the debate. The rules point to a fairly wide range for the Fed’s interest rate target — from roughly 3.65 to 4.25 percent. That spread is large enough to give both camps reasonable footing.

In short, the disagreement is unusual, but appropriate.

• Why Are Officials Split?
• What the Rules Say
  • Taylor Rules
  • NGDP Targeting Rules
• Why This Matters
• Looking Ahead

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