Fed Officials Hint at Future Rate Cuts but Remain Vague Ahead of December Meeting

On the matter of interest rate cuts, the recent rhetoric from Federal Reserve officials has become increasingly ambiguous: They still believe that the inflation rate will drop to the 2% target level and imply support for further rate cuts in the future, but they refrain from discussing whether they will cut rates again at the next interest rate meeting in two weeks.

On the same day, Mary Daly, the president of the Federal Reserve Bank of San Francisco, said in an interview: "In order to keep the economy in a good place we have to continue to recalibrate policy. Whether it'll be in December or sometime later, that's a question we'll have a chance to debate and discuss in our next meeting, but the point is we have to keep policy moving down to accommodate the economy ."

"I think we need to keep an open mind and gather more information," she added.

In Daly's view, the current supply and demand are roughly balanced, inflation is continuing to decline, and the Federal Reserve should continue to commit to lowering interest rates while also maintaining restrictiveness, "which is important." She believes that the so-called neutral interest rate (neither stimulating economic growth nor inhibiting it) may already be "close to 3%."

However, given the uncertainty of the specific figure for the neutral interest rate, Daly believes the Federal Reserve should cut rates slowly. She said: I think we can take our time and make adjustments as the economy provides us with more information.

On the same day, Chicago Fed Chairman Austan Goolsbee also spoke in a program, but he too did not reveal his views on the outcome of the Federal Reserve's December meeting. He merely stated that interest rates should drop significantly from the current level in the coming year.

"Over the next year it feels to me like rates come down a fair amount from where they are now, but we meet every six weeks because the conditions change," he said.

Federal Reserve Governor Adriana Kugler, who has long-term votingrightst in the FOMC meetings, also revealed almost no signals in her speech on Tuesday. She merely said that the Federal Reserve would make decisions meeting by meeting, and the bank's current policy is prepared to deal with uncertainty.

Kugler stated at the Detroit Economic Club: "I view the economy as being in a good position after making significant progress in recent years toward our dual-mandate goals of maximum employment and stable prices. The labor market remains solid, and inflation appears to be on a sustainable path to our 2% goal"

In recent times, Federal Reserve officials have been avoiding providing too much guidance on the path of interest rates, especially after Trump was re-elected as President of the United States last month. Analysts warn that Trump's promises regarding import tariffs, tax cuts, and immigration crackdowns could change the economic outlook in the coming months.

As Daly, Goolsbee, and Kugler said on Tuesday, the Federal Reserve cannot react to policies that have not yet been announced. They are all closely monitoring the latest data to weigh the upcoming decisions. A significant amount of important data will be released in the next two weeks, including Friday's monthly employment market report and next Wednesday's November Consumer Price Index (CPI).

Federal Reserve Chairman Powell will give a speech on Wednesday, which is expected to be his last public speech before the December meeting. According to the CME FedWatch tool, the market still expects a higher probability of a 25 basis point rate cut this month (74%).