Multiple Federal Reserve officials have spoken out, suggesting a pause in interest rate cuts

Zhitong Finance has learned that several Federal Reserve officials confirmed on Thursday that the Fed may keep interest rates at current levels for an extended period, only lowering them again when inflation shows significant signs of cooling.

Boston Fed President Collins stated on Thursday that officials are facing "considerable uncertainty" regarding the U.S. economic outlook, and that the pace of rate adjustments should slow down. Collins mentioned at an event in Boston that the Fed's "policy is prepared to make necessary adjustments based on changing circumstances—if inflation does not make further progress, it will be maintained at current levels for a longer time."

The inflation gauge favored by the Fed rose 2.4% year-over-year as of November, with a 2.8% increase excluding food and energy, both above the Fed's 2% target.

She noted that the U.S. economy is in "good shape," but pointed out that progress in curbing inflation this year may be slower than previously expected. She added that the new economic policies of the incoming Trump administration and the Republican-controlled Congress could also alter the economic trajectory, although it is too early to estimate how this will play out.

This view was echoed by Fed Governor Bowman and other regional Fed presidents.

Bowman pointed out that the persistent inflation risks justify a slower pace of rate cuts. She stated that she voted to lower rates last month, but added that she could have supported keeping borrowing costs stable. She said, "I still prefer a cautious, gradual approach to adjusting policy."

Kansas City Fed President Schmidt indicated that interest rates may be close to a level that neither stimulates nor slows the economy. Like Collins, Schmidt is a voting member this year.

Philadelphia Fed President Harker also stated on Thursday that he is prepared to support further rate cuts in 2025, but the timing will depend on economic conditions. Harker said, "I still believe we will be on a path of declining policy rates. Looking at everything in front of me, I do not intend to leave this path or turn back. But the exact pace at which I continue down this path will depend entirely on incoming data."

At the December meeting last year, Fed policymakers cut rates for the third consecutive time, lowering the benchmark rate by 25 basis points, bringing the total rate cut for the year to one percentage point. Many Fed officials indicated that it is appropriate to slow the pace of rate cuts currently, as inflation remains above the 2% target and the labor market is healthy.

Collins stated in an interview on Wednesday that she expects the magnitude of rate cuts this year to be smaller than previously anticipated a few months ago. She indicated that her expectations for interest rates align with the median forecast released by Fed officials after the December meeting, which showed two rate cuts of 25 basis points this year. According to futures contract pricing, investors widely expect policymakers to keep rates stable at the meeting on January 28-29.

Collins stated on Thursday that she supports the action taken in December as "luck." Collins explained, "Overall, the rate cut in December provided some additional assurance for maintaining a healthy labor market while sustaining the restrictive policy stance needed for continued price stability recovery."

Meanwhile, the minutes from the Federal Reserve's December meeting released on Wednesday showed that nearly all participating decision-makers believed that the upside risks to the inflation outlook had increased, partly due to potential changes in trade and immigration policies. Participants noted that recent inflation data exceeded expectations and the potential impacts of changes in trade and immigration policies indicated that the decline in inflation might take longer than previously anticipated, with many believing that the decline could temporarily stall or carry such risks.

Participants believed that the Fed had reached or was close to a point suitable for slowing down easing; many felt that decision-making in the coming quarters should be cautious. Most decision-makers supported a 25 basis point rate cut in December, stating it was a carefully weighed decision, but some believed that not cutting rates could be beneficial