Fed Policy Rift Deepens: Millan Demands Aggressive Cuts While Barkin Urges 'Fine-Tuning'

Deep ideological divisions within the Federal Reserve are spilling into the public domain, creating a complex backdrop for the US Dollar ahead of Fridays Non-Farm Payrolls (NFP) report. The central bank appears split between a faction advocating for aggressive stimulus and those favoring data-dependent caution.

The Dove: Millan Calls for >100bps Cuts

Federal Reserve Governor Stephen Millan, a vocal dove and former Trump advisor, has explicitly called for the Fed to slash interest rates by more than 100 basis points this year. Millan argues that the current policy stance is dangerously restrictive and risks choking off economic growth.

The Hawk: Barkins 'Fine-Tuning'

In sharp contrast, Richmond Fed President Thomas Barkin pushed back against aggressive easing on Tuesday. Speaking in North Carolina, Barkin emphasized that the economy requires “fine-tuning” rather than blunt force.

Market Implications

The diverging views highlight the uncertainty surrounding the January 27-28 FOMC meeting. While the Fed cut rates by 25bps in December, future moves are contingent on incoming data. Markets are currently pricing in a slowdown in hiring, with Fridays NFP expected to show roughly 60,000 new jobs, down slightly from the previous month.

Until the data clarifies the economic trajectory, the USD is likely to remain sensitive to this clash of narratives between the Fed's “growth-first” and “inflation-first” camps.