Fed Officials Not Signaling Interest Rate Cuts Yet

Key Takeaways

• Fed officials are weighing in on the outlook for possible interest rate cuts, ahead of an eagerly anticipated speech on Friday by Fed Chair Jerome Powell.
• Fed Gov. Michelle Bowman urged for more ‘caution’ before cutting rates, while another Fed official said that a September cut wasn’t a ‘certainty.’
• Minneapolis Fed President Neel Kashkari downplayed making cuts larger than a quarter percentage point at the September meeting of the central bank’s policy committee.

As market participants await highly anticipated remarks from Federal Reserve Chair Jerome Powell, his colleagues have been providing their own thoughts on interest rates and economic conditions. 

Many economists expect Powell, who speaks at the Jackson Hole Economic Symposium on Friday, to once again signal that the Fed could cut the influential fed funds rate soon. They predict he will echo comments from after the last Fed meeting in late July, when he said a September rate cut was on the table.

For more than a year, the Fed has held its benchmark interest rate at its highest levels in more than two decades, raising borrowing costs for businesses and consumers in an effort to discourage spending, balance supply with demand, and, in turn, fight inflation. 

But with inflation falling and the labor market weakening, some economists say it’s time to move on interest rates. Not all Fed officials are singing the same tune.

Bowman, Goolsbee Raise Questions on Timing 

In remarks Tuesday, Federal Reserve Gov. Michelle Bowman said she still sees risks to inflation from issues such as geopolitical tensions and housing demand. These risks, along with uncertainty over how well the labor market is performing, make her want to see more data before committing to an interest rate cut in their next meeting on Sept. 18, she said.

“I will remain cautious in my approach to considering adjustments to the current stance of policy,” Bowman told a group of Alaskan bankers.

Chicago Fed President Austan Goolsbee also said Tuesday he was waiting for more data.

“I don’t think it’s a certainty,” Goolsbee said when asked by CBS News whether the Fed was set to cut interest rates in their next meeting.

In an interview with the Wall Street Journal, Minneapolis Fed President Neel Kashkari said it was appropriate to have a debate about interest rate cuts in September in light of the weakening labor market. However, Kashkari told the paper he didn’t see the need for a cut larger than a quarter point.

His comments come as some economists have argued the Fed needs to make more aggressive cuts to counter further deterioration in the labor market.

Meanwhile, Federal Reserve Vice Chair Michael Barr, Governor Christopher Waller and Atlanta Fed President Raphael Bostic didn’t weigh in on interest rates during speaking engagements this week.

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