Fed voting member Daly: No reason to stop rate cuts this year, neutral rate expected to be close to 3%
Federal Reserve Governor Lael Brainard stated that the current interest rates are too tight and is expected to continue cutting rates, believing that the neutral interest rate is close to 3%. She emphasized that she does not want the labor market to weaken further, and pointed out that the 50 basis point rate cut is due to concerns about the economy. Other Federal Reserve officials also lean towards a more moderate pace of rate cuts, believing that policy adjustments should be made cautiously to address economic uncertainties
As U.S. inflation gradually returns to the Federal Reserve's 2% target, this year, Federal Reserve voter Daley spoke out, stating that the Federal Reserve needs to adjust its policies and is expected to continue cutting interest rates.
On Monday, Mary Daly, President of the Federal Reserve Bank of San Francisco, stated at The Wall Street Journal's TechLive conference:
"So far, I haven't seen any information indicating that we won't continue to cut interest rates. The current interest rates are too tight for an economy that is already on a 2% inflation path. I don't want to see further weakness in the labor market."
At last month's interest rate decision, Federal Reserve officials initiated the first rate cut cycle since the outbreak of the pandemic, lowering the benchmark interest rate by 50 basis points to a range of 4.75% to 5%. Analysts believe that this move was made out of concerns about deteriorating labor market conditions and inflation falling near the Federal Reserve's 2% target.
Regarding the rate cut decision in September, Daly stated, "The decision to cut rates by 50 basis points instead of 25 basis points was a 'narrow victory'," even though she strongly supported a 50 basis point cut at the time.
Economic data released after the significant rate cut showed that the employment situation in recent months was stronger than initially reported, and market participants are now more inclined to believe that the Federal Reserve will make a slight 25 basis point cut at the policy meeting on November 6th and 7th.
During Monday's meeting, Daly did not comment on the pace of future rate cuts, but she emphasized:
"We will continue to adjust policies to ensure that they are appropriate for our current and evolving economy."
She also stated that the reasonable expectation for the neutral interest rate is 2.5%-3%, and her personal view is close to 3%.
On the same day, several other Federal Reserve officials also spoke out, indicating a preference for a more moderate pace of rate cuts than the 50 basis points in September.
Dallas Fed President Lorie Logan stated, "In the high degree of economic uncertainty in the United States, the Federal Reserve should cut rates cautiously," believing that "gradually lowering policy rates to more normal or neutral levels can help manage risks and achieve goals."
Minneapolis Fed President Neel Kashkari stated that he expects to make some more moderate rate cuts in the coming quarters to bring rates to a neutral level. Kansas City Fed President Jeffrey Schmid also stated that he hopes to "avoid excessive actions, especially considering the uncertainty about the policy endpoint"