Schmid and Goolsbee pressed pause on cuts, keeping mortgage markets on edge
Two Federal Reserve officials broke with the majority over this week’s quarter‑point rate cut, arguing the central bank risked getting ahead of the data even as mortgage markets welcomed another step down in borrowing costs.
Kansas City Fed president Jeff Schmid and Chicago Fed president Austan Goolsbee both dissented from the Federal Open Market Committee’s December decision, citing stubborn inflation and still‑solid economic momentum.
Neither will vote on the FOMC in 2026, but both signaled they expect more easing next year than the central bank’s official projections implied.
“In my view not much has changed since the previous meeting of the Federal Open Market Committee just six weeks ago,” Schmid said in a statement explaining his no vote.
“Inflation remains too high, the economy shows continued momentum, and the labor market – though cooling – remains largely in balance. I view the current stance of monetary policy as being only modestly, if at all, restrictive. With this assessment, my preference was to leave the target range for the policy rate unchanged at this week’s meeting.”
Schmid warned that inflation uncertainty could push long‑term yields higher and reverse decades of progress in anchoring expectations – a move that would filter directly into government bond and mortgage pricing.
He pointed to former chair Alan Greenspan’s ideal of inflation being “so low and stable over time that it does not materially enter into the decisions of households and firms,” arguing the Fed could not “be complacent” about that credibility.
Instead of welcoming cheaper money, president Donald Trump sharpened his attacks on Federal Reserve chair Jerome Powell and signaled that his next choice to lead the central bank would push harder for aggressive easing.https://t.co/EIuIXI27nh
— Mortgage Professional America Magazine (@MPAMagazineUS) December 11, 2025
Goolsbee, in a CNBC interview and a post on the Chicago Fed’s website, said he has been “uncomfortable front‑loading too many rate cuts and assuming that what we’ve seen in inflation will be transitory.”
He noted that inflation has been above the 2% target “for four and a half years” and argued “the last six months have shown no progress,” with services prices “relatively disturbing.”
“While I voted to lower rates at the September and October meetings, I believe we should have waited to get more data, especially about inflation, before lowering rates further,” Goolsbee said.
He added that he was “pretty optimistic that for 2026 rates will be able to be a fair bit lower than they are today,” but saw little extra risk “to just wait to Q1 2026, and make sure that we’re back on path at 2% inflation.”
Mortgage professionals now face a more complex backdrop: a Fed that has resumed easing, a labor market some officials viewed as weakening, and influential voices warning that if inflation stayed “too hot,” term premiums – and with them, mortgage rates – could be forced higher again.
Rate relief looks likely over 2026, but the path there would depend on whether the next few inflation prints finally confirm the disinflation story the majority at the Fed has already started to price in.
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