In the context of recent global economic turmoil, the actions of the Federal Reserve have undoubtedly become the focus of attention for global investors. Last night, several officials from the Federal Reserve spoke in succession, providing in-depth analysis and outlook on the current monetary policy and economic situation. Among them, the speech by the 2025 FOMC member and President of the Federal Reserve Bank of Kansas, Schmid, was particularly noteworthy.
In his speech on October 22, Schmid addressed the uncertainty of how low the current Federal Reserve interest rates should be reduced and proposed a bold suggestion - to slow down the pace of rate cuts. He emphasized that in his first public speech since August, he hoped the policy cycle could return to a "more conventional" approach. This view not only reflects the cautious attitude of the Federal Reserve towards the current economic situation but also indicates that future monetary policy may become more prudent and sustainable.
Schmid stated that slowing down the pace of rate cuts would help the Federal Reserve determine a neutral interest rate level. At this level, the policy would neither suppress economic growth nor push the economy into overheating. He believes that such a policy environment is crucial for maintaining economic growth, price stability, and achieving full employment. At the same time, he also expressed optimism about achieving such a policy cycle but emphasized that policy formulation would be cautious and gradual.
When discussing the labor market, Schmid believed that what is currently seen is the normalization process of the labor market, not a serious deterioration. This view is in stark contrast to some recent pessimistic expectations about the labor market. He emphasized that although there have been some signs of weakness in the labor market, overall, it is still on the track of normalization.
At the same time, another Federal Reserve official, Kashkari, also expressed his views on the current economic situation. He said that the high inflation problem in the United States is not caused by the labor market but is affected by a variety of complex factors. Regarding the issue of tariffs, he believes it is unlikely to cause long-term inflationary pressure and may only lead to a one-time price adjustment.
Kashkari also emphasized the reason for the Federal Reserve's 50 basis point rate cut. He pointed out that signs of weakness in the labor market have been seen, which is one of the important reasons for the Federal Reserve's decision to cut rates. At the same time, he also said that he absolutely hopes to avoid an economic recession and wants to maintain stable economic growth through prudent monetary policy.
Overall, the speeches of Federal Reserve officials reveal a cautious attitude towards the current economic situation and a prudent expectation for future monetary policy. They hope to maintain economic growth, price stability, and achieve full employment by slowing down the pace of rate cuts and seeking a policy that is "more conventional." At the same time, they are also closely monitoring changes in the labor market and hope to respond to potential risks and challenges through prudent monetary policy.
In the days to come, we can expect the Federal Reserve to continue to adhere to the principles of prudence and prudence, formulating monetary policies that are more in line with the current economic situation. At the same time, we should also maintain attention and vigilance to the global economic situation in order to better respond to potential risks and challenges.
- 10 July'24
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