During a recent speech, Daly emphasized, “So far, I haven’t seen any indication that we will stop lowering interest rates.” This statement comes amid discussions by the Federal Reserve Presidents from Kansas City and Minneapolis on the potential for a measured approach to rate cuts. Torsten Slok, Chief Economist at Apollo Global Management, noted that the likelihood of the Fed maintaining current rates in its November meeting seems to be increasing. However, Daly from the San Francisco Federal Reserve expressed that she sees no justification for pausing rate cuts.
In his first public remarks since August, Federal Reserve President Schmid stated his desire for a more “normalized” policy cycle, focusing on fine-tuning measures that support economic growth, price stability, and full employment. He pointed out that a more gradual approach to rate cuts could help the Fed identify a “neutral level,” where policy neither pressures the economy nor excessively stimulates it.
“I am optimistic that we can achieve this cycle without major shocks, but I believe it requires a cautious and gradual policy approach,” Schmid added. He also remarked, “While I support easing restrictions, I tend to avoid making large moves, especially given the uncertainty regarding the ultimate goals of our policy and my aim to prevent excessive volatility in financial markets.”
Minneapolis Federal Reserve President Kashkari echoed similar sentiments, indicating his preference for a slower rate-cutting pace in the upcoming quarters. “I currently anticipate several modest rate cuts to reach a neutral level, but this will depend on the data,” he noted. He emphasized that to speed up actions, there needs to be “clear evidence of a significant weakening in the labor market.”
Slok highlighted that the Atlanta Federal Reserve estimated a 3.4% growth in the U.S. GDP for the third quarter, suggesting the economy is experiencing a “no-landing” scenario characterized by sustained growth and a resurgence of inflation. He pointed out that the economy is facing “ten significant tailwinds,” which increases the likelihood that the Fed will have to change direction in their November meeting and potentially pause rate cuts.
In contrast, Daly reiterated, “So far, I haven’t seen any information indicating we will stop lowering rates.” She added, “For an economy approaching a 2% inflation target, the current rates feel very tight, and I do not wish to see further deterioration in the labor market.”
The U.S. employment report for October is set to be released on November 1, a crucial timing that aligns with the upcoming presidential election and the next Fed meeting.
