Chapter 1: Why did the Federal Reserve decide to cut interest rates?
Spare a thought to all you monetary policy types for Jay Powell and the gang. You've got one tool. You can't do two things at once. From American Public Media, this is Marketplace. In Los Angeles, I'm Kyle Risdell. It is Wednesday today, the 10th of December. Good as always to have you along, everybody.
That tool that the Federal Reserve has, monetary policy, interest rates, the two jobs, maximum employment, and stable prices. The challenge in late 2025? As I mentioned, and as I've mentioned here before, the situation is that our two goals are a bit in tension. Yes, yes, you have mentioned that.
Interestingly, everyone around the table at the FOMC agrees that inflation is too high and we want it to come down and agrees that the labor market has softened and that there's further risk. All right. So what's the problem? Where the difference is, is how do you weight those risks? And what does your forecast look like? And where do you ultimately where do you think the bigger risk is?
You tell us. We made a decision today. We had, you know, nine out of 12 supported it. So fairly broad support. But it's not like the normal situation where everyone agrees on the direction and what to do. It's more spread out. And I think that's only inherent in the situation. So here's the way it shook out. A quarter percentage point cut, as you've heard. Nine votes for that. Two wanted no cut.
One wanted a deeper cut. More dissent than usual, but about what everybody had been expecting, honestly. Three questions on artificial intelligence, which is a lot for a Federal Reserve press conference. Inflation and tariffs, of course, made an appearance, too. It's really tariffs that's causing most of the inflation overshoot.
And we do think of those as likely to, in the current situation, as likely to be a one-time price increase. Our job is to make sure that it is, and we will do that job. But right now, you've got this difficult balance, and there are risks to both sides. There's no risk-free path. Words to live by. There is no risk-free path. Wall Street today. Traders, well, they do love them some rate cut talk.
We will have the details when we do the numbers. So a cut today, another cut in 2026, maybe two. But we are starting to see the Fed's policy diverge from other central banks around the world. Over the past couple of days, there have been suggestions from the central banks of Canada, Australia and the Eurozone that they might be done cutting rates for now, might even raise soonish.
Marketplace's Justin Ho spent some time today trying to figure out why other central banks are feeling that upward pressure on rates and what that might mean here.
It's a little unusual when central banks move in opposite directions.
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Chapter 2: How does the U.S. Federal Reserve's strategy differ from global central banks?
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This is Marketplace. I'm Kai Risdahl. Let's talk about your paycheck. I mean, not your paycheck, but everybody's paycheck. By the official count, which comes from the Bureau of Labor Statistics, wages and benefits together were up 3.5% in September. That is year over year. The Employment Cost Index is the official nomenclature for that little data point.
Shows it's a bit higher than inflation's running, so, you know, good for workers, but Nothing to write home about either. Marketplace's Sabri Beneshour is on that one. A three and a half percent annual increase in wages and benefits is actually the lowest since 2021.
There was a big run up in the growth of wages and benefits right after the pandemic.
And that's been coming down fairly steadily.
Erica Groschen is with Cornell School of Industrial and Labor Relations. The jobs that are getting the biggest raises now are actually the ones that did not get those big raises during the pandemic. What you've seen is catch up. from the workers who are essentially left behind.
So, for example, unionized workers who did not get big raises back then because they were locked into multi-year contracts are finally getting them. Government workers also doing better. Leisure and hospitality workers, though, who saw huge wage gains during the pandemic, they are now not seeing that.
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