Federal Reserve officials speak intensively, opening the door wide for another significant interest rate cut

According to the Wise Finance APP, several Federal Reserve officials on Monday opened the door to further significant interest rate cuts, pointing out that the current level of interest rates still poses serious pressure on the U.S. economy. However, these Federal Reserve officials did not indicate a preference to repeat the Fed's 50 basis point rate cut last week, and stated that upcoming data will guide their decisions.

Chicago Fed President Austan Goolsbee stated at an event, "In the next 12 months, we still have a long way to go to bring interest rates down to neutral levels in an attempt to maintain the current economic conditions." Goolsbee expects the Fed's current benchmark interest rate to be "several hundred basis points" above the neutral rate.

In terms of calling for rate cuts, Goolsbee's voice is stronger than other Fed officials. He emphasized that the U.S. employment situation and inflation are at favorable levels, but unless the Fed "significantly" cuts rates in the coming months, this situation will not persist. He said, "If the time limit is too long, you will not stay in the best position for the dual mandate for too long."

Goolsbee reiterated his views. He warned that when the job market deteriorates, it deteriorates faster than the central bank can alleviate through rate cuts. Historically, large-scale layoffs create a negative feedback loop in which unemployment leads to reduced spending, further causing other companies to lay off workers in response to declining demand.

Goolsbee said, "Waiting for problems to arise is unrealistic. If we want to achieve a soft landing, we cannot lag behind the situation." Regarding the unemployment rate rising from last year's historic low of 3.4% to 4.2%, Goolsbee stated that this is a level that most people consider to be consistent with full employment.

Goolsbee, Atlanta Fed President Raphael Bostic, and Minneapolis Fed President Neel Kashkari all expressed support on Monday for the Fed's decision to cut rates by 50 basis points last week.

On the issue of how fast the Fed should cut rates, Bostic appears to be more cautious than Goolsbee. However, he also acknowledged that there may still be room for rate cuts before reaching the neutral rate.

Bostic stated at an event organized by the European Economic and Financial Center, "I don't know who would reasonably argue against our claim that we are significantly above it (the neutral rate)." He also stated that uncertainties about inflation and employment should rule out the possibility of a rate cut exceeding 50 basis points.

Bostic did not directly state whether he would support another 50 basis point rate cut, warning against assuming a repeat of last week's rate cut. However, he also said, "If there is further evidence of substantial weakness in the job market in the next month or so, it will definitely change my view on the intensity of policy adjustments."

For months, Fed policymakers have been debating where the neutral rate might be, and whether the neutral rate has risen since the pandemic severely disrupted the U.S. and global economies. Most economists believe that the neutral rate has risen, although it is uncertain whether this is a temporary or permanent change Christopher Waller, a member of the Federal Reserve Board, said last Friday that unexpectedly positive inflation data in recent weeks prompted him to support a 50 basis point rate cut at last week's policy meeting. He may support a 25 basis point rate cut at the next two policy meetings. Waller added, "If the labor market deteriorates or inflation data continues to be weaker than everyone's expectations, you may see the pace of rate cuts accelerate." However, he also pointed out that a resurgence in inflation could lead the Fed to pause rate cuts.

Waller's views contrast with those of Federal Reserve Board member Michelle Bowman. Bowman said last Friday that she voted against the Fed's decision to cut rates by 50 basis points at last week's policy meeting - the first time a Fed official has dissented on a rate decision since September 2005 - because she remains concerned that inflation is above target