The Federal Reserve is poised to deliver a second consecutive rate cut this week to shore up a fragile labour market, but extending the easing cycle beyond October could meet a firm wall of resistance from officials who, to put it politely, remain unimpressed by the Fed’s progress on inflation.

For now, the doves have the upper hand, cutting rates and congratulating themselves for acting decisively. Their rivals, however, fear the Fed is merrily sawing through the branch it is sitting on.

Fresh data last week showed US core inflation rising at its slowest pace in three months, which all but locks in next week’s cut, but the broader picture, one of stubborn price pressures, hardly justifies a full-blown rate-cutting spree.

Policymakers have spent much of the year assessing the economic fallout from tariffs and other policy gyrations. After a sharp hiring slowdown over the summer, they trimmed the policy rate by 25 basis points in September and pencilled in two more reductions by year-end. Since then, labour-market readings, patched together by private data providers during the government shutdown, have done little to inspire confidence. Chair Jerome Powell recently admitted the jobs market has “weakened substantially” and warned of “pretty significant downside risks”.

Futures markets, ever obedient, have priced in a quarter-point cut next week, another in December, and a third by March. Treasury investors, delighted by the prospect, have enjoyed their best returns since 2020, with yields dropping further this month as rate-cut fever spreads.

But consensus ends there. Resistance is building among regional Fed presidents, including Alberto Musalem in Kansas City, Jeff Schmid in St. Louis, and Beth Hammack in Cleveland. September’s dot plot revealed that nine of nineteen officials backed only one more cut this year, and seven opposed any further easing at all.

Even those hawks who reluctantly voted for September’s cut note that labour supply has fallen in tandem with demand, largely due to lower immigration. In plain terms, fewer new jobs are now needed to keep unemployment stable. Several officials believe the breakeven pace of job growth is roughly the current three-month average, a meagre 29,000 per month.

Meanwhile, inflation anxiety is quietly creeping back. Tariffs have not produced the dramatic price spikes many predicted, but the constant drumbeat of new levies risks longer-lasting distortions, with pressures emerging well beyond tariff-exposed goods.

The uncomfortable truth is that inflation has hovered above 2 per cent for more than four years, and may not return to target before 2028. Stay above the goal that long and long-term expectations start to drift, the stuff of central bankers’ nightmares.

“Stable long-run inflation expectations are an important testament to monetary-policy credibility,” said Philadelphia Fed President Anna Paulson this month. “Finishing the job and returning inflation to 2 per cent is crucial.” It was a polite reminder that, for central banks, credibility is the only currency that truly matters, and the Fed cannot afford to let it devalue.

Adding to the confusion, the government shutdown has blocked access to official data. Without clear evidence, policymakers are flying blind, divided, and uncertain, relying on guesswork.

In short, cuts are coming, but consensus is not. The doves will claim victory in October, yet beyond that lies more hand-wringing than harmony. The Fed wants a smooth glide path back to 2 per cent. The economy, inconveniently, never agreed to the flight plan.