The Federal Reserve proposes a significant interest rate cut once again, while the Bajin warns of the "last mile" of inflation.

The Federal Reserve is continuing discussions internally on whether interest rates are still restrictive. On one hand, Federal Reserve Board member Stephen Milan believes that there is no strong enough price pressure in the current economy to support high interest rates. He thinks that the policy stance is already tight and there is a need for another significant rate cut within the year. On the other hand, Richmond Fed Chair Tom Barkin emphasizes the need to remain cautious in monetary policy until inflation has fully returned to target levels, in order to ensure stability in the labor market. Milan stated in a media interview on Tuesday that he is inclined to see a rate cut of "slightly more than one percentage point (100 basis points)" this year. He voted against the Fed's decision to keep rates unchanged last week, advocating for a 25 basis point cut. During the Fed's consecutive 25 basis point rate cuts at the end of last year, Milan also opposed it multiple times and instead supported a larger 50 basis point cut. Milan pointed out that when he looks at the potential inflation situation, he does not see any clear price pressures in the economy. He believes that the current high interest rates are more due to some "peculiarities" in the way inflation is measured rather than actual price pressures that necessitate a response from monetary policy. The division in views highlights whether the policy is already restrictive enough. In contrast to Milan, Richmond Fed Chair Tom Barkin emphasized the stability risks during the process of inflation returning. Barkin stated that the rate cuts implemented last year provided a "safety net" for the labor market to maintain resilience during the inflation decline. He noted that the Fed's current focus is still on completing the "last mile" of bringing the inflation rate back to the 2% target. Despite some reduced uncertainty and signs of improvement in economic prospects, risks still exist as hiring activity remains concentrated in a few industries and inflation levels have not fully returned to the target range. Last week, Fed officials kept the benchmark interest rate unchanged in the 3.5% to 3.75% target range. Fed Chair Powell stated after the meeting that the current policy stance, following three consecutive rate cuts last year, provides necessary flexibility for decision-makers to address employment and inflation risks. Barkin also mentioned that the uncertainty resulting from tariffs and other policy changes began to gradually dissipate at the beginning of 2026. He cited discussions with businesses, indicating that overall demand remains stable, and he expects tax refunds, lower gas prices, and a more accommodative monetary environment to support the economy this year. At the same time, he warned that the resilience of the U.S. economy currently relies largely on investments in artificial intelligence infrastructure and spending by affluent consumers, which are interconnected. "These two areas are intertwined," he said. "If there is a slowdown in artificial intelligence investments, it could impact business investment and the stock market; and once the net assets of the affluent class shrink, it may weaken their consumption capacity in turn."