Fed Vice Chair Philip Jefferson said Monday that the evolving balance of risks—of stubborn inflation and weaker employment conditions—underscores the need to lower interest rates slowly. Jefferson's careful hedging reflects deep splits among Fed colleagues over next steps on rates. Fed Gov. Christopher Waller said Monday that he supports another quarter-point rate cut in December to help boost an ailing U.S. labor market, and he doubts that he will change his mind. Meanwhile, two of the leading contenders to replace Fed Chair Jerome Powell took aim at the central bank, sharpening their criticism as the White House prepares for a decision on Fed leadership. And lawyers of Fed Gov. Lisa Cook provided the first detailed defense of her mortgage applications ahead of a Supreme Court hearing in January.

Correction: Fed Vice Chair Philip Jefferson said the evolving balance of risks underscores the need to lower interest rates slowly. A previous version of the newsletter mistakenly said Jefferson underscored the need to lower interest-rate cuts slowly.

Federal Reserve officials face a challenge resolving differences over how to set interest rates with little new economic data to guide tricky judgment calls.

Fed Vice Chair Philip Jefferson offered a case study in the central bank’s predicament on Monday, acknowledging the risk of stubborn inflation and weaker employment conditions—dueling threats that call for opposing prescriptions.

“The evolving balance of risks underscores the need to proceed slowly” with rate cuts, Jefferson said during a talk at the Kansas City Fed.

Fed Gov. Christopher Waller said he supports another quarter-point interest rate cut by the Fed in December to help boost an ailing U.S. labor market—and he doubts that he'll change his mind. The influential governor, a candidate to become Fed chair next year after Jerome Powell's term as chair ends, said on Monday that the labor market is getting weaker and he's less worried about inflation. Waller said he's convinced the labor market has gotten worse based on surveys of consumers and businesses and his own contacts among large employers. Inflation, meanwhile, has not increased by much in the past few months, Waller argued. He said a slowing economy and still-high interest rates have weighed on consumer spending, helping to keep inflation in check. (MarketWatch)

Two of the leading contenders to replace Federal Reserve Chair Jerome Powell took aim at the Fed, sharpening their criticism as the White House prepares for a decision on the central bank’s leadership. Kevin Warsh, a former Fed governor, published an op-ed in The Wall Street Journal on Sunday, arguing that the central bank has become an obstacle to stronger economic growth. He accused Fed leadership of “defending its mistakes instead of correcting them” and said the institution had fallen victim to “the tyranny of the status quo.” And Kevin Hassett, the director of the National Economic Council, who has also emerged as a top contender, echoed much of that message during an interview Monday on CNBC. Hassett said the Fed had made “a lot of policy errors” and needed to “turn the page” by returning to an “independent and data-driven” approach. (Barron's)

8:30 a.m.: Import & Export Price Indexes
9 a.m.: Johnson Redbook Retail Sales Index
10 a.m.: NAHB Housing Market Index
10:30 a.m.: Federal Reserve Governor Michael Barr speaks at Kogod School of Business Alan Meltzer Speaker Series event
6 p.m.: FRB Dallas President Lorie Logan speaks at Global Perspectives event

8:30 a.m.: U.S. International Trade in Goods & Services
8:30 a.m.: New Residential Construction - Housing Starts and Building Permits
10 a.m.: Federal Reserve Governor Stephen Miran speaks at the Bank Policy Institute and Small Business & Entrepreneurship Council event
12:45 p.m.: Federal Reserve Bank of Richmond President Thomas Barkin speaks at VACEOs luncheon
2 p.m.: Federal Open Market Committee meeting minutes published

The dollar could remain supported in the near term on bets that the Federal Reserve will take a cautious approach to cutting interest rates, Macquarie strategist Thierry Wizman says in a note. "Traders seem to have accepted the prospect that the Fed is not very likely to cut its policy rate on December 10." This should keep the dollar lifted for now along with indications of growth softness and political uncertainty abroad, he says. Further ahead, however, there is a risk that the Fed cuts rates significantly in 2026 as it bows to political pressure even if the U.S. avoids a severe downturn or recession, he says. — Renae Dyer

WSJ Pro Central Banking brings you central banking news, analysis and insights from WSJ’s global team of reporters and editors. This newsletter was compiled by markets reporter Vicky Ge Huang in New York. Send your tips, suggestions and feedback to vicky.huang@wsj.com.