The "Three Musketeers" of the Federal Reserve: If the slowdown in inflation continues, interest rates will be cut in the coming months

The Fed's "Three Musketeers" are dovish, further increasing the possibility of interest rate cuts this year.

On Tuesday local time, the third most important figure at the Federal Reserve, New York Fed President Williams, gave an interview to well-known financial journalist Nick Timiraos, known as the "Fed News Agency." During the interview, he indicated that there are signs that the U.S. labor market is cooling down, and that the inflation data for the past three months is "getting closer to the deflation trend we want."

Williams stated:

"These are positive signs, and I hope to see more data showing sustainable progress towards the 2% inflation target to further boost confidence."

"In fact, we will learn a lot between July and September."

In his article, Nick Timiraos commented that Williams' remarks conveyed the following message—

Williams hinted that the Fed is close to cutting interest rates but is not yet ready to do so. Even if one or two officials support it, the Fed will not cut rates in July; if the economy remains stable, the Fed may consider cutting rates in September.

This means that if inflation continues to slow down in the near future, the Fed may need to cut rates in the coming months.

Williams also added that even if the Fed starts cutting rates, interest rates will be maintained at a level that restricts economic activity.

"We are taking an appropriate restrictive policy stance,"

"I do believe that at some point we need to make a decision, not to get rid of the restrictive policy stance, but to lower rates in a way that eases policy restrictions."

Nick Timiraos pointed out that this move may be to strike a balance between cutting rates too early and cutting rates too late to guard against potential risks: the former could lead to a rebound in inflation, while the latter could cause a sharp deterioration in the job market.

In addition, Williams also refuted the notion of the so-called "last mile" of inflation resistance, believing that compared to higher levels of inflation in the past, reducing inflation from its current level to 2% is not more difficult:

"This is not a story about the 'last mile' or a story of inflation stickiness. Different inflation indicators are moving in the right direction and are quite synchronized."