Fed Members Discuss Interest Rate Policy

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Fed Members Discuss Interest Rate Policy

US Federal Reserve (Fed) officials indicate that a cautious and prudent approach should be taken regarding interest rate cuts. They state that changes in interest rate policies may arise depending on economic conditions, while also expressing that inflation risks still exist. These statements provide important clues about the Fed's future monetary policy stance.

Bowman: “We must be cautious about interest rate cuts” Michelle Bowman, one of the governors of the Federal Reserve, highlighted the challenges in assessing labor market data, noting that inflation risks are still valid. She emphasized the need to maintain price stability and expressed a preference for addressing interest rate cuts cautiously and gradually. With a labor market close to full employment, she stressed the need for careful consideration before lowering the policy rate.

Bowman's remarks suggest that economic indicators must be closely monitored and that quick decisions should not be made regarding interest policies. This approach aligns with the Fed's goal of sustainable economic growth.

Goolsbee: “Economic conditions will dictate interest decisions” Austan Goolsbee, President of the Chicago Fed, stated that the pace of interest rate cuts will be entirely determined by economic conditions. He revealed that the Fed hopes to reach a point of economic recession by the end of next year and expects the monetary policy to have a neutral impact on the economy. Goolsbee suggested that the interest rate could be around 3%, emphasizing that this figure is significantly lower than the current level.

The forecasts evaluated during the Fed's September meeting indicate that the neutral level in interest policies may differ from earlier predictions. Goolsbee's assessments prioritize achieving economic balance.

Hammack: “It may be time to slow down interest rate cuts” Beth Hammack, President of the Cleveland Fed, argued that slowing down interest rate cuts could be a sensible decision. She expressed the view that key economic indicators are strong, suggesting that this approach could pave the way for bringing policy to appropriate restrictive levels. Hammack stated that she will continue to evaluate decisions on how to adjust the current federal funds rate at the Federal Open Market Committee meeting scheduled for December 17-18.

Hammack noted that financial markets have priced in an interest rate cut by the end of January and expect several more cuts by the end of 2025. These forecasts appear to align with the anticipated gradual improvement in economic growth and inflation.