As the Federal Reserve's monetary policy meeting on December 17-18 approaches, market attention on whether this month's interest rate cut will occur continues to heat up. However, the latest statements from Federal Reserve voting members have not clearly committed to a rate cut, instead showing a cautious "wait and see" attitude. They unanimously believe that a rate cut remains a possibility for the future, but decision-making will be based on the latest economic data, with the interest rate path still dependent on changes in economic conditions.
Daly: Interest rates should continue to decline, timing of cuts depends on the economy
On December 3, San Francisco Fed President Mary Daly expressed that the Federal Reserve is continuously assessing economic conditions, and it is still uncertain whether to cut interest rates in December, though rate cuts remain the primary policy tool of the Fed. Daly believes that to accommodate the economy, the Fed needs to gradually lower interest rates, whether this month or later. She pointed out that although inflation levels continue to fall back to the 2% target, the overall stance of monetary policy remains restrictive, making it important to further lower interest rates.
Daly also mentioned that the U.S. economy's supply and demand are roughly balanced, with the neutral rate possibly close to 3%. However, given the uncertainty of the neutral rate, she suggests that the Fed take a slow and cautious path to cutting rates to adjust policy based on economic data.
Kugler: Policy evaluated per meeting, be vigilant of risks
Federal Reserve Board member Adriana Kugler also did not explicitly support a December rate cut in her speech, emphasizing that the Fed will evaluate the effectiveness of policy measures on a meeting-by-meeting basis. She stated that the fundamentals of the U.S. economy are strong, with a robust job market and unemployment rate close to full employment levels. Although October's PCE inflation data continues to show inflation falling toward the target, Kugler cautions that potential risks may hinder the downward trend in inflation, requiring the Fed to remain vigilant.
Waller: Leaning towards a rate cut but staying flexible
Federal Reserve Board member Christopher Waller expressed support for rate cuts in his speech. He said that a December rate cut is reasonable, but if data released before the meeting changes his predictions on the inflation trend, he may prefer to keep rates unchanged. Waller acknowledged that the pace of inflation decline might be slowing, but also noted there are no significant signs of a rise in current service prices.
Williams and Bostic: Emphasize data-driven approach, maintain flexibility
John Williams, the third-ranking official at the Fed and President of the New York Fed, mentioned in his speech that although inflation and employment risks tend to balance, the Fed may still need to cut rates further to neutralize the policy stance. He reiterated that interest rate decisions will be based on economic data and will closely watch the latest data before the December meeting.
Atlanta Fed President Raphael Bostic stated that he has not yet decided whether to support a rate cut this month, but believes a rate cut in the coming months is necessary. He argues that the current dual mandate of the Fed—maximizing employment and controlling inflation—has shifted towards a balanced state, providing a basis for adjusting rates.
Market Reaction: Increased Cautious Sentiment
Amid the cautious statements from voting members, the market's expectations for a December rate cut have fluctuated. Although the probability of a rate cut was previously predicted to be high, uncertainties about the Fed's course of action remain among investors as more data is released.
Currently, the consensus among Fed officials is that future rate cuts could still be necessary, but the pace of action will be primarily cautious, with policy-making fully considering the delicate balance between economic growth and inflation control.
