The Fed's No. 3: It is appropriate to lower the federal funds rate now
In August, the US labor market continued to be weak, with employment falling short of expectations. New York Federal Reserve Bank President Williams stated that the Fed has made "significant progress" in achieving its dual mandate of price stability and maximum employment, and now it is appropriate to lower the federal funds rate
On September 6, New York Federal Reserve Bank President Williams stated after the release of non-farm data:
"The Fed has made 'significant progress' in achieving its dual mandate of price stability and maximum employment, with the risks to both mandates now in 'balance'. The inflation rate is gradually moving towards the 2% target, and it is appropriate to lower the federal funds rate now."
In August, the U.S. labor market remained weak, with employment falling short of expectations. On September 6, the U.S. Bureau of Labor Statistics released a report showing that non-farm payrolls in the U.S. increased by 142,000 in August, below the expected 165,000, with July's data revised significantly downward from 114,000 to 89,000.
A rate cut this month is almost a certainty, but there is still debate on the extent of the cut. Expectations for a significant rate cut by the Fed this month are rising in the market.
Williams expects the Fed to lower rates to around 2.25% this year, approaching 2% next year.
Traders predict the probability of a 50 basis point rate cut by the Fed this month has risen from 36% before the data release to about 50% currently. At the same time, the market predicts a total rate cut of about 115 basis points for the full year of 2024, higher than the previous forecast of 108 basis points.
Powell stated last month: "The timing and pace of rate cuts will depend on incoming data, evolving outlook, and the balance of risks."