The Indicator from Planet Money - How a former Fed vice chair would approach rate cuts

Episode Date: December 9, 2025

Federal Reserve is meeting to make its interest rate decision after the government shutdown delayed key economic data. Today on the show, we talk to the former Vice Chair of the Fed, Lael Brainard, about what she would do with interest rates in this critical yet foggy economic moment.Related episodes: A little doomsday feeling is weighing on the economyCan ... we still trust the monthly jobs report?For sponsor-free episodes of The Indicator from Planet Money, subscribe to Planet Money+ via Apple Podcasts or at plus.npr.org. Fact-checking by Sierra Juarez. Music by Drop Electric. Find us: TikTok, Instagram, Facebook, Newsletter.See pcm.adswizz.com for information about our collection and use of personal data for sponsorship and to manage your podcast sponsorship preferences.NPR Privacy Policy

Hey everyone, it's Darien Woods here. Just quickly before we start the show, I want to take a minute to talk about public media. This is what makes the indicator and other NPR podcasts special. Public media was founded to inform, to educate, and to expand our perspective. But as of this fall, federal funding for public media, including NPR and local NPR stations, has been eliminated.

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from across NPR's podcasts, and support public media by signing up for NPR Plus today. Just go to plus.npr.mper.org. NPR. This is the indicator from Planet Money. I'm Darym Woods. And I'm Stephen Besaha. Because of the recent government shutdown, a lot of economic indicators have been delayed or even cancelled. That is troubling for decision makers.

The chair of the Federal Reserve, Jerome Powell, recently put it like this. If you're driving in the fog, you slow down. And so if the central bank is a car slowly driving in the fog? Well, this week it's hit a T intersection. The Federal Reserve is meeting today and tomorrow to decide what to do. On one side is the way of high interest rates. You might call this Hawks Highway, a steeper incline of higher borrowing costs

that will try to finally vanquish inflation. But the other direction is Doves Drive. That's a gentle downward slope promising lower interest rates and encouraging businesses to start hiring again. So in one direction, stable prices or the other one, jobs. Which road should we take? They're missing official statistics. And so for them, that's very difficult. That is Leal Braynard.

She was one of the drivers of this central bank car. She was on the big decision-making committee at the Fed for eight years. Most recently, she was vice chair. Today on the show, we get inside the committee that makes the big decision steering the economy and learn what this former decision maker would do today. Leo Braynard says the decision that the Fed's committee tomorrow will be fueled by two sources, caffeine and sugar. Everybody gathers for coffee and donuts in the morning,

and every person sits around this massive table, and they each have their own time to make an observance. about what they're seeing in the economy. She says there does seem to be more disagreements between decision makers at the moment, but... People listen to each other. Even when they disagree, they take each other's views very seriously. At today's meeting, those observations might be taken even more seriously because of that lack of government data. So because of the government shutdown, there's a whole host of indicators who were missing. The CPI, the Consumer Price Index, was canceled for October and delayed for November.

The latest jobs report only covers jobs from months ago. How would you describe this situation for decision makers? So right now, with that data being so lagged, at a moment where the economy is really pulled between these opposing forces, primarily because of tariffs and immigration restrictions, but also because of the AI boom, that is starting to affect both job prospects. and very much investment because it's pulling investment away from manufacturing in some of the areas that are not immediately related to AI. So at a moment like this, you really want up-to-date data. She says those up-to-date indicators are needed to really know whether the risks of having higher inflation outweigh the risks of having higher unemployment. It would be great to have the most recent data instead of two-month-old stale data to try to make those decisions. Yeah, how bad is it to be missing this data at this critical time?

So it is certainly an impediment, but it's also true that when the economy is at turning points, it's just always hard to read the economy. The data always feels a little bit like driving, looking into the rear view mirror, because it is inherently backward looking. So a moment like this, it would be hard to read the economy even with the most recent official statistics. So thought experiment, you are on the committee this week, and positive news is your binder is a little thinner, easier to lug in. The downside is that there's less data. So what would you be looking at instead? So I would do a lot of calls and meetings in that intervening time. I used to find that incredibly important at turning points in the economy. I would certainly

look at all the private sector and non-governmental data sources that are up to date. Lail's talking about private sources like ADP and Revelliol Labs' jobs numbers. These are businesses using job listings and payrolls to try and give their best estimates of how the labor market's doing. Also, consumer sentiment surveys. People are much more worried about job security than they were even a year ago. So what's your take? If you were there in the decision-making room, Would you vote for raising interest rates, lowering them, keeping them the same? So I think it's actually quite a difficult decision.

I do think it's important for the committee to bring inflation to 2%, which is their target over the next two years. On the other hand, we don't want to see the economy go into a downward self-reinforcing spiral where more people are laid off. they are no longer able to afford the same consumption. And so the economy weakens and there are more layoffs. So I would probably on balance favor one more cut and then holding for a period of time, but with a very firm commitment to getting inflation to 2% over the next two years. What some people call a hawkish cut. That I think would be the right way to describe that.

And the surveys I've seen, people are, getting increasingly worried about jobs. But when you ask Americans what the number one issue facing the country is, inflation and prices seems to be number one. And so by cutting, is that putting more weight onto the jobs and economy part of the equation and less so on the inflation and prices? So you're absolutely right. Affordability is the critical challenge for American households. Electricity is more expensive. Health care is becoming incredibly expensive. Groceries have become more expensive.

Then, of course, we know housing has been challenging for some time. But a lot of those things that I just mentioned really are not simple price pressures that will be affected by cutting rates. They are longstanding challenges that have to do with underlying supply dynamics, like in the housing sector. And so a more complicated set of solutions, I think, are really, important there. And they really sit with the White House with the executive branch. In other words, Lail thinks that high prices aren't the same thing as rising prices.

She says for people on ACA insurance, their high prices are stinging because the subsidies aren't being extended. She also says groceries could be made cheaper by removing the tariffs. And that's different than the high interest rates needed to curb generally rising prices throughout the economy. You said that the data in a critical time is kind of like looking at the rear of mirror because it's past events. And would you say that now it's like looking at the rearview mirror that is also foggy? Well, either that or, you know, a very imprecise rearview mirror. Tomorrow, the Federal Reserve will announce its decision.

Whether it was the right one, we'll only know when we get to look back through that rearview mirror. This episode was produced by Corey Bridges with engineering by Robert Rodriguez. It was fact-acted by Cooper Katz McKim. Kate Concannon edits the show and The Indicator is a production of NPR.