Multiple Federal Reserve officials have spoken out on the prospects of interest rate cuts.
On October 21st, local time, Dallas Federal Reserve President Lorie Logan stated in a speech that the economy is strong and stable, but there are still significant uncertainties surrounding the rise of labor market risks and the Federal Reserve's inflation target. The Federal Reserve needs to remain flexible and be willing to adjust when appropriate.
"If the economy develops as I currently predict, gradually reducing the policy interest rate to a more normal or neutral level will help manage risks and achieve our goals," Logan said.
On the same day, San Francisco Federal Reserve President Mary Daly said in an interview that she sees no signs indicating that the Federal Reserve should stop cutting interest rates, and the current interest rates are still high enough to "absolutely" curb the economy.
Daly said that the (Federal Reserve's) goal is a soft landing, with inflation cooling down to 2%, a healthy labor market, and wages catching up with higher prices. As inflation declines, the Federal Reserve needs to continue to lower policy interest rates; otherwise, the policy may become too tight and harm the labor market.
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Kansas City Federal Reserve President Jeffrey Schmid said in a public speech that he hopes for a "more normalized" policy cycle, in which the Federal Reserve can "moderately" adjust to maintain economic growth, stabilize prices, and achieve full employment. A slower pace of interest rate cuts would allow the Federal Reserve to find the so-called neutral level, where policy neither drags nor stimulates the economy.
"I am optimistic about achieving this cycle without any significant shocks, but I believe it will require cautious and gradual policy," Schmid said, adding that while he supports reducing the restrictiveness of policy, he prefers to avoid large fluctuations; considering the uncertainty of how low the Federal Reserve will eventually lower interest rates, he prefers to slow down the pace of interest rate cuts. This was Schmid's first public speech since August this year, and he will serve as a Federal Reserve governor next year.
Data released by the U.S. Bureau of Labor Statistics shows that the U.S. CPI rose 2.4% year-on-year in September, compared to the previous value of 2.5%; the core CPI rose 3.3% year-on-year, compared to the previous value of 3.2%. In September, the U.S. added 254,000 non-farm jobs, significantly exceeding market expectations; the unemployment rate was 4.1%, compared to the previous value of 4.2%.
At 2:00 a.m. on September 19th, Beijing time, the Federal Reserve announced that it would lower the target range of the federal funds rate by 50 basis points to 4.75%-5%, marking the first interest rate cut in more than four years. Data from the Chicago Mercantile Exchange (CME Group) shows that as of the time of writing, the market expects an 89% probability that the Federal Reserve will lower the target range of the federal funds rate by 25 basis points in November, and an 11% probability that it will remain unchanged.
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