Personnel within the U.S. Federal Reserve System (Fed) are sending warning messages every day to the market’s expectations of an interest rate cut. It is interpreted that the market has already set its sights on an interest rate cut, with the U.S. Dow Jones index reaching a record high, so it has begun to adjust its tone.
On the 17th (local time), Austan Goolsbee, President of the Federal Reserve Bank of Chicago, who is considered a dovish (easing monetary policy) member of the Federal Reserve, said in an interview with CNBC, “It is too early to declare victory in the fight against inflation, and the decision to cut interest rates is “It will be done based on future economic data,” he emphasized. He added: “We have made a lot of progress in 2023, but I caution everyone that we are not done yet. “Future data will determine the direction of interest rates,” he emphasized.
In an interview that day, Governor Goolsbee was optimistic about the possibility of a soft landing in the United States, but said, “We must lower inflation to the target level of 2%. “It would be excessive to count how many chickens we have right now until we are sure we are on that path,” he said. Referring to the American proverb that says, “Count your chickens before they lay eggs,” the mayor emphasized, “You shouldn’t drink kimchi soup first.”
Previously, New York Fed President John Williams also mentioned that it was premature, saying in an interview the day after the Federal Open Market Committee (FOMC), “We are not discussing a cut.” In response to Federal Reserve Chairman Jerome Powell’s statement the day before that the timing of the interest rate cut was “the topic of today’s discussion,” the market began to evolve as the market solidified its outlook for a March cut.
According to the Chicago Mercantile Exchange’s FedWatch, interest rate futures investors are weighing a March cut with a 70% chance despite warnings from Federal Reserve officials. Although this figure is lower than the 80% immediately after the FOMC, a cut in March is still likely. In an interview with the Wall Street Journal (WSJ), Governor Goolsbee also did not rule out the possibility of a March cut and said, “If inflation moves along the current path, a rate cut would be appropriate.”
Ultimately, the November personal consumption expenditures (PCE) inflation rate, which will be released on the 22nd as the last major inflation figure of the year, is expected to affect the direction of this early reduction theory.
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Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.