Federal Reserve's Gursbi: Interest rates need to be "significantly" lowered in the next year
Chicago Federal Reserve President Guersby reiterated that interest rates will need to be "substantially" lowered in the coming year to address changes in inflation and the job market. He pointed out that the unemployment rate has risen to 4.2% and hopes to keep it from rising further. The Fed cut rates by 50 basis points last month in an effort to boost the job market. Although forecasts suggest that future rate cuts may be smaller, it will depend on economic developments. Guersby also mentioned that strikes by port workers on the East Coast and Gulf Coast could have an impact on the economy
According to CNBC, Chicago Federal Reserve President Charles Evans reiterated that interest rates need to be "substantially" lowered in the coming year. Evans emphasized that the Fed's focus has shifted from inflation to the labor market, adding that he hopes to prevent the unemployment rate from rising further, which currently stands at 4.2%.
In an interview on Thursday, Evans stated, "Inflation is coming down, close to target, the unemployment rate has risen, and the labor market is basically where we want it. Interest rates need to be substantially lowered in the next 12 months."
Fed policymakers cut rates by 50 basis points at last month's meeting, marking the first rate cut since the outbreak of the pandemic. This move, higher than the usual 25 basis points cut by the Fed, aims to boost the U.S. job market as hiring has slowed in recent months. The inflation rate, which rose to its highest level in 40 years two years ago, has now cooled significantly, approaching the Fed's 2% target.
Fed watchers are now turning their attention to the November policy meeting. While last month's projections suggested that officials may opt for smaller rate cuts of 25 basis points at the Fed's final two meetings of the year, the extent of the cuts will depend on the economic developments.
The employment report scheduled to be released on Friday will further reveal the health of the labor market. Evans also commented on the strike by dockworkers at ports along the U.S. East Coast and Gulf of Mexico. He noted that retailers and manufacturers have about a two-week inventory of goods and warned that a strike lasting more than two weeks would begin to have a greater impact on the economy