Fed Civil War: Doves, Hawks, and ‘Risk-Management Cuts’ Split the Path Ahead

The Federal Reserve’s internal divisions came into sharper focus on Monday as a series of speeches from policymakers highlighted starkly different views on the path of monetary policy. With Chair Jerome Powell scheduled to speak today at the Greater Providence Chamber of Commerce (12:35pm ET), investors are parsing through the rhetoric to better understand what Powell meant by last week’s “risk-management cuts” and how unified the central bank really is about its next steps.

Fed Governor Steven Miran, a temporary appointee to the Board of Governors, delivered easily the most dovish message. In a wide-ranging speech, Miran defended his dissent in favor of a 50-basis-point rate cut at the September meeting, arguing that policy is “considerably restrictive” and poses a direct threat to the Fed’s employment mandate. He estimated that the federal funds rate is nearly 200 basis points above neutral, and suggested the appropriate level should be in the “mid-2% area.” Miran cautioned that keeping rates too high risks “unnecessary layoffs” and higher unemployment, particularly as growth momentum slows into 2026. He also leaned on alternative frameworks, stressing that Taylor-rule estimates are helpful but incomplete, and highlighted how immigration and fiscal policy are reshaping rent inflation and the long-term neutral rate. He projected that rent inflation could fall from 3.5% now to 1.5% by 2027, and argued that forecasters have underestimated the disinflationary impact of immigration. His remarks had a political edge, criticizing the Fed for straying beyond its core mission and acknowledging his own short tenure as a governor on leave from the White House.

In sharp contrast, Cleveland Fed President Beth Hammack, who will be a voting member in 2026, delivered one of the most hawkish perspectives of the day. Hammack described monetary policy as only “modestly restrictive,” rejecting the view that the Fed is applying too much pressure on growth. She expressed deep concern about inflation’s persistence, warning that pressures in both goods and services are likely to climb further. Hammack emphasized that the Fed is “being challenged on both sides of its dual mandate,” with low-income households struggling even as overall unemployment remains at just 4.3%—a level she described as near full employment. To her, the key risk is moving too quickly to ease and letting inflation expectations slip. She pointed to stable WARN notices and a still-solid ratio of job openings to unemployed workers as evidence that the labor market is far from collapse. At the same time, she acknowledged “signs of fragility” in payrolls but underscored that the headline softness does not yet justify rapid easing. Hammack placed her estimate of the neutral rate higher than many of her colleagues, reinforcing her call for patience and caution before removing policy restraint.

St. Louis Fed President Alberto Musalem , who will vote at the next two meetings, took a middle course between Miran’s dovish urgency and Hammack’s hawkish caution. Musalem said he supported last week’s quarter-point cut as a “precautionary move” designed to safeguard the labor market but made clear that he sees “limited room for further easing.” He stressed that monetary policy must continue to lean against inflation, which remains above target, and noted that tariffs are contributing to price pressures in ways not yet fully realized. Musalem described the economy as “near full employment” and warned that overemphasizing labor risks could lead to overly loose policy that ultimately does more harm. While open to additional cuts if job conditions weaken, he said such moves would only be appropriate provided inflation expectations remain anchored. Musalem also used his remarks to defend central bank independence, emphasizing that quantitative easing should be seen as a tool strictly for the dual mandate rather than a means of supporting government debt management.

In an exclusive interview with the Wall Street Journal , Atlanta Fed President Raphael Bostic said persistent inflation concerns leave him hesitant to back another rate cut at the Fed’s October meeting, even as economic risks shift more toward employment. Bostic revealed he penciled in just one rate cut for all of 2025 at last week’s FOMC meeting—mirroring his June projection—and stressed those forecasts were made “with a very light pencil” given the uncertainty. While comfortable with last week’s reduction, he emphasized that inflation running above the Fed’s 2% target remains his top worry. Bostic, who is not a voting member until 2026, noted the economy is being reshaped by President Trump’s aggressive tariffs and tighter immigration policies, which could add to price pressures and slow labor force growth.

The divergence in tone across these three officials illustrates the challenge Powell faces in uniting the Federal Open Market Committee around a consistent message. Miran emphasized the risks of excessive restriction and unemployment. Hammack focused on inflation’s stubbornness and the danger of moving too quickly. Musalem struck a cautious balance, supporting only limited easing until clearer evidence of labor weakness emerges. For investors, the debate reflects the Fed’s unresolved struggle to weigh an inflation rate still well above target against a labor market that is softening but not collapsing.

Each policymaker also underscored different metrics they are watching. Miran is attuned to rent inflation and immigration’s impact on neutral rates. Hammack is focused on real-time labor market signals such as WARN notices, job openings, and inflation persistence in services. Musalem highlighted the inflationary effects of tariffs and the importance of monitoring expectations. This diversity of focus complicates the Fed’s messaging and makes it harder for markets to extract a singular policy path.

Markets currently anticipate two more quarter-point cuts by year-end, consistent with Powell’s “risk-management” framing. But the wide gulf between the doves and hawks suggests that incoming data on inflation and jobs will be decisive. Powell is unlikely to deviate from his recent script today, instead reiterating that the Fed is committed to its dual mandate while defending last week’s cut as a calibrated move to manage risks. Yet Monday’s speeches made clear that consensus is fragile, and that the question of how far the Fed should go in easing policy is still very much open.