San Francisco Fed President Mary Daly said she expects the Fed to continue cutting interest rates this year to protect the labor market.
“I think two more rate cuts this year, or one more rate cut, really straddles the spectrum of what I think is possible based on my forecast for the economy,” Daly said Wednesday at a discussion at Boise State University in Idaho, referring to one or two 25 basis point rate cuts.
Last month, the Federal Open Market Committee (FOMC) cut interest rates by 50 basis points, a larger-than-normal amount, due to signs of weakness in the job market and inflation retreating toward the Fed's 2% target. Fed Chairman Powell said the move was intended to protect the U.S. labor market as inflation approaches the 2% target.
Daly described the move as a "calibration," the same way Powell characterized the rate cuts as aimed at maintaining the strength of the economy.
Daly noted that as inflation falls, real interest rates are rising, adding a bigger drag on an economy already close to the Fed’s inflation and employment goals.
“This, in my opinion, will ultimately lead to the collapse of the economy,” she said. “I don’t want to see a further slowdown in the labor market.”
Earlier in the day, Boston Fed President Collins said officials were "prudent" in cutting interest rates by 50 basis points last month amid falling inflation and greater vulnerability to shocks.
“In this context, I view an initial 50 basis point rate cut as prudent, recognizing that monetary policy remains in restrictive territory,” Collins said in a prepared speech Wednesday in Worcester, Massachusetts. She added: “Further adjustments may be needed.”
Collins largely repeated comments she made on Tuesday, including her view that policymakers should take a "cautious, data-based approach" to lowering interest rates to help maintain the strength of the U.S. economy. She again stressed that policy was not on a predetermined path.
A strong nonfarm payrolls report last week eased concerns about a cooling labor market and gave policymakers room to cut interest rates more slowly. Investors now expect the Fed to cut rates by a quarter point in November and do so again in December.
Minutes of the Sept. 17-18 meeting released on Wednesday showed that the vast majority of policymakers supported a sharp rate cut, but also indicated that there was intense debate over the decision. Some participants said they preferred a 25 basis point rate cut at the September meeting, while a few others said they might support that move. All officials supported a rate cut at the September meeting.
The article is forwarded from: Jinshi Data