Cleveland Fed President Mester stated that although recent progress has been made in lowering inflation, the Fed's mission is not yet complete. She pointed out that the inflation rate is still above the 2% target, and geopolitical events may lead to a rebound in energy prices. Despite a decrease in housing service inflation, rising rents may keep housing inflation high. Policymakers cut interest rates for the first time last month and may take gradual rate-cutting measures in the future. The latest data shows that initial jobless claims were lower than expected, supporting market expectations for gradual rate cuts by the Fed
According to the Wise Finance APP, Cleveland Fed President Hamaek stated that although progress has been made in lowering inflation in recent months, officials are not yet ready to declare that their mission is complete.
Hamaek said on Thursday, "We have made good progress, but the inflation rate is still above the 2% target set by the Federal Open Market Committee (FOMC). The COVID-19 pandemic and its subsequent effects remind us that different changes in the components of inflation may have a significant impact on the overall inflation path."
She pointed out some factors that may continue to put pressure on price increases. Geopolitical events could lead to a "rapid reversal" of the recent decline in energy prices, she said. Meanwhile, although housing services inflation has declined, research by the Cleveland Fed suggests that housing inflation may still remain at a high level as existing tenants face gradually rising rents.
Hamaek also noted that although progress on addressing inflation issues by the central bank is not "linear," officials are still able to restrain price growth while maintaining a significantly strong labor market and overall economy.
At last month's meeting, policymakers cut rates by an unusually large half a percentage point, the first rate cut since the outbreak of the pandemic, as the labor market showed signs of weakness and the inflation rate approached the Fed's 2% target.
Several policymakers in recent weeks have indicated a preference for a slower or more gradual rate cut in the coming months.
Initial jobless claims in the U.S. fell from a revised 242,000 to 227,000 last week, below the market's expected 245,000. The data supported market expectations of a gradual rate cut by the Fed. The "Fed Watch" tool from the Chicago Mercantile Exchange (CME) shows that the probability of a 25 basis point rate cut in November has increased from 92% yesterday to 97% now. The U.S. dollar index also slightly rebounded, with the yields on 10-year and 2-year U.S. Treasury bonds rising slightly above the levels before the data was released