Federal Reserve officials' "dovish" tone is gradually emerging: Continuing to cut interest rates remains appropriate

According to the Zhitong Finance APP, Chicago Federal Reserve President Austan Goolsbee stated on Monday, "I believe the federal funds rate will continue to decline unless there is some compelling evidence of economic overheating." Goolsbee mentioned that the Federal Reserve is expected to continue cutting interest rates, moving towards a stance that neither restricts nor promotes economic activity. Meanwhile, Minneapolis Federal Reserve President Neel Kashkari also indicated that considering a rate cut next month is reasonable.

Goolsbee added, "The speed at which this will happen will depend on the outlook and environment, but for me, the entire process is very clear; we are on a path that will lead to lower rates, closer to what we call neutral levels."

He stated that his forecast for the neutral rate is close to the official median estimate, which was 2.9% in September.

On Tuesday, the Federal Reserve will release the minutes from the Federal Open Market Committee (FOMC) meeting held on November 6-7, where policymakers lowered the benchmark rate by 25 basis points, following a 50 basis point cut in September. They will meet again on December 17-18.

Due to the ongoing rebound in the U.S. economy and recent strong inflation data, several officials have urged a cautious approach to future rate cuts. Some officials have expressed support for a more gradual pace of cuts going forward. Federal Reserve Chairman Jerome Powell stated earlier this month that the economy has not signaled that officials need to rush to cut rates.

Before the December meeting, policymakers will have more data to digest, including the inflation indicators favored by the Federal Reserve and employment reports. The latest data on the Fed's preferred price index will be released on Wednesday. Progress on inflation has slowed in recent months, with inflation gradually approaching the Fed's 2% target.

Goolsbee stated on Monday that it is important not to "draw any conclusions from one month of data." He said, "I think the overall situation in recent months is that inflation has often been below expectations, but it has not been far above the 2% target." He referred to the Fed's price growth target.

Meanwhile, Minneapolis Federal Reserve President Neel Kashkari stated that considering another rate cut at the Fed's December meeting remains appropriate.

Kashkari said on Monday, in response to whether policymakers should cut rates by 25 basis points at their last meeting of the year, "This is still a reasonable consideration, and as far as I understand today, we are still considering a 25 basis point cut in December, which is a reasonable debate for us."

Kashkari indicated that in the face of higher rates, the resilience of the economy suggests that the neutral rate may now be higher. The neutral rate refers to a policy that neither restrains nor stimulates economic growth. He mentioned that this raises the question of how much monetary policy contributes to cooling economic demand. The longer this resilience lasts, the more he believes this shift may be structural rather than just temporary.

Kashkari said, "This is what I am trying to understand now, how much downward pressure we are applying to the economy and what the path of inflation is." He added, "I have some confidence that the unemployment rate is slowly declining, and the labor market remains strong." Kashkari stated that while a one-time tariff may lead to a one-time price increase, if other countries implement retaliatory measures, it could continue to drive prices higher