Amid the US federal government shutdown and data shortfall, Chicago Fed President Austan Goolsbee, Fed Governor Lisa Cook, and San Francisco Fed President Mary Daly all said on Monday that they have not yet made a decision on whether to cut interest rates again in December.
Goolsby points out that given inflation concerns and the lack of official economic data, the threshold for another rate cut is higher.
In an interview, he said, "I haven't decided what to do at the December meeting yet. I'm nervous about the inflation situation. You see inflation has been above the target level for 4.5 years and is heading in the wrong direction."
Last week, the Federal Reserve lowered its target range for the federal funds rate by 25 basis points to between 3.75% and 4.00%, as expected. This is the Fed's second rate cut this year (2025) and the second consecutive rate cut since September. For the first eight months of this year, the Fed remained on hold, awaiting an assessment of the impact of tariffs and other policy adjustments on the economy.
Goolsby stated that he anticipated two rate cuts this year, which have now materialized. He said he remains concerned about "premature rate cuts," noting that core inflation over the past three months has been 3.6% on an annualized basis, while core services inflation has been close to 4% over the same period. The Federal Reserve's inflation target is 2%.
“This is worrying because the situation is heading in the wrong direction. It makes me uneasy if we just expect this situation to disappear because it is temporary.”
Regarding the labor market, Goolsby said he believes the unemployment rate remains stable at 4.3%, and other indicators are less affected by demographic changes or immigration policies.
“If you look back over the past 12 months, the unemployment rate hasn’t risen. If the job market starts to deteriorate in a more pronounced way, that will change the balance of risks,” he added.
On the same day, Cook also stated in a speech at the Brookings Institution in Washington: "Looking ahead, policy will not follow a predetermined path. Every meeting, including the December meeting, is a 'live meeting'."
She pointed out that current policies are somewhat restrictive. However, the risks to the Fed's dual mandate have both increased: inflation remains high and faces upside risks; the labor market remains solid, but it needs to be closely monitored for signs of trouble.
Cook emphasized that a rate cut is possible in December, but it will depend on any new information that comes out later.
Daly stated that she had previously supported rate cuts, and that the cuts were appropriate. The 50-basis-point rate cut this year puts the Federal Reserve in a more advantageous position, and policymakers should be open to the December rate decision. She emphasized that inflation remains above target and needs to be brought down, while the labor market has clearly slowed.
All three acknowledged that developing policies in the absence of data presents challenges.
(Article source: CLS)
